CNBC price updates: Jamie Dimon, markets and Microsoft's new initiative - (9/24/2018)

CNBC exclusive hey again Jeff oh thank you so much Karl yep we're here with Jamie diamond Jamie this is quite a commitment to an area that frankly has gone from bank to unbanked city just pulled out over the course the last five years fifteen million dollars a network 330 banks have closed in the last ten years why why not yeah well you know with regulatory reform and tax reform where you now says twenty billion dollar thing going to many cities obviously Philadelphia is the seventh largest mark in the United States that's not including their biggest suburb called New York and you know we and we like to be part of a community we're already here in investment banking commercial banking and private banking retail is a gap so we're gonna open 50 branches 20 percent will be in LMI neighborhoods neighborhoods like this and when we come in we bring the full force of JP Morgan which is philanthropy dollars but to really help people like entrepreneur color funds affordable housing units and and we enjoy it it's good for the company and over time and we're we invest the long run we never pulling it out of something talked about the multiplier effect and when you open a branch people think you know what we don't need branches anymore everything's digital yeah but brick the more works it's amazing so I think people aren't thinking clearly a million people visited branches every day the type of branch is gonna change the size that branch can change they're getting smaller but more advice so there's a mortgage loan office in there there's a small business loan officer there's a financial adviser but your financial affairs so that'll change but a million people even even the average millennial visits something like three times a quarter so to me the question of brands no more forget they'll change but you still need to serve your client the way they want to be served not the way I want to serve them as you know we've rolled out all these new products too right like like finding the online only bank well maybe mention this because a lot of people feel that 10 years ago one of the problems was the education the borrower the boy or did not know enough about what to do you said to be someone in there literally to help and to teach yeah well that make a difference versus say 10 years ago yeah I've told the people here when you go to these LMI neighborhoods try something special but we were gonna roll a lot of financial education tools we have you invest we're gonna roll out a self advised group and we haven't decided price yet so that you could advise and think about we already put on the screen you can get your FICO score and we're gonna teach you ways and you which you can improve your FICO so you can reduce cost a bar and stuff like that we have to do a better job not just us but the America educating people in financial matters from rainy day funds to handle you know retirement accounting and so we're making especially have to do that now it's only have things coming out that hopefully our customers will enjoy let's talk about the power of business versus the power of government the government legendarily got big settlements from different banks 13 billion dollars from you Keith Blood says that you pay a total of 44 billion did that money go into the community and did that was that the way to get things done versus the targeted way you're doing well there's this actually ups community I mean that some of those funds we don't actually know how they're dispersed and I think one day someone to look at that and that kind of the past we've moved forward about how we do it for you but this is how you build a community small business lending affordable housing branches and advise people and we know that that works cities know this city philadelphia your great hometown think the city is doing better and better and better but parts it or not and so we do make a special effort in those parts of that city now there is a sense that lending nationally is slowed down I'm not getting that from your bank can you give us a sense of what's going on in places that frankly are unbanked and whether there is a revival that can actually move the needle for you so one of one important thing these things work when you do it with civic society and government okay they don't work we're at each other so we've seen all around the world when mayors not-for-profits businesses work together you can get people jobs you get them in train to get them employed and it actually works and so but in America America the economy is quite strong and and it's growing at 3% it has been now for a couple of quarters and it looks like that way there are no great potholes so let me very well continue and so lending it there is a little bit reduction lending in middle market we don't exactly know why large corporations of course bonds public markets could clients be to flush I think you know it we do know there's an effect that through tax reform and corporations or any money they need to borrow less it's just hard to figure it ease it out but what that really means but if you told look at employment growth people going back to work it's pretty good all right now last week you told CNBC that it's not a don't call it a trade war call it a trade skirmish obviously you've said that there could be at times perhaps a slowdown or at least in the psyche because of the of any sort of trade war how do you feel about I told at race course twenty billion dollars of tariffs in and of themselves are a little bit of attack if they don't get paid as a tax in America many people do other things right they they have done supply lines but the twenty trillion dollar economy so that that is a negative the real negative isn't that it's confidence consistency if people start reducing investment people start moving the supply chains around that we have seen already moves the markets a little bit and so and the fear that the skirmish may become a war so we we really don't think it's a great way to go bad it could easily offset some of the benefits they've seen from regulatory reform and tax reform I won't you talking about regulate for me yeah Marian Lake said recently a fabulous CFO that we haven't really seen genuine regulatory that would make her happy but there's been so much it's been change of attitude no yeah so I think if you when I travel around CEOs of other industries logistics steel manufacturing pipeline they've all seen it have we seen actual changes in regulation for us not really they have a long list of things they want to do there has been regulatory change for the smaller banks which we totally support to make a little bit easier for them reduced to burn them but it doesn't didn't have any to do for the bigger banks I think in the public you know we're not asking for throwing out dodd-frank we're simply people's me look at calibrating getting rid of duplication looking at things that hurt the mortgage market or at this kind of market so you can enhance growth and do it safely know was looking at you know going back to good old days just recalibrating remember there were two thousand rules it was like one or two is a lot and they were done in haste and people show his rash and look at cost-benefit you know what makes sense what doesn't all keeping the system safer I remember growth a stronger economy it also makes the financial system safer now you just mentioned no rate potholes we've got a Fed meeting that's coming up this week the spread that you would get to intend to use the you know like the typical logic that people say means that you can't make as much money and if we can't lend as much yeah so I'm gonna say they know potholes the households in good shape people going back to work fight customers say five doors are fine companies flage tax reform is still a benefit we don't have the extreme leverage we hadn't Oh a and and all the lending has been pretty good prime good good lending so it's not been billing but absolutely there's friction out there there's always friction you open up a newspaper any week of any month is tons of friction and it's mounting brexit QE turkey Argentina oh and we don't know the full effect of those things so yeah we keep our eye on that but it may not derail the economy you're gonna see separate the two I keep thinking these are all things that should play to your fortress balance sheet strength we've not seen we got European banks that are really really on the run so to speak why isn't JPMorgan making Greater presents given the weakness the rest of the world well we do it we're in every country and we're steady growing and we do country by country anymore bankers systems people and all the support risk legal credit compliance so our share in Europe is gone up considerably and and we're just doing for adding people and adding branches and you know the basic good old three yards and a cloud of dust okay when I hear stuffs I think you should get a higher price dirties vulnerable for Evans sake you're selling it twelve times next reserves we've been at this game for a long time if for your growth financial with money that's made every single day you open the door why aren't you valued like it's a blessing to company that's a question you're gonna have to answer your banks are under still under political regulatory constraints and all that we just went through the crisis I think a lot of people as investors buy always a little worried but you're right worrying very good returns in capital we're growing you know whenever when a cycle hit obviously could affect the bank but we will manage right through that cycle just like we did it right through the last one okay when I think about that I think that you must be in there buying stock every day for the company you've chosen a path of buying back stock shrieky but I still many shares you have for the last ten years your share count is not going down enough when will you start getting back to level that where you really are not where you're sopping up the door supply I don't member the exact number but our share counts down like fifteen percent yeah but we're doing six versus ten years ago two three five yes yeah well there's someone had been issued over time but since I've been there it's been coming down so but if you want to look at something I would prefer to spend that money not buying back stock doing this so growing our business is far better for the economy right now we don't have a lot choices but over time I really would prefer not to buy back stock you know companies to do it would make sense I also don't buy this argument that it's bad buying back stock is simply giving it back to you an investor who then redeploys to a better use its redeployment of capital that should be redeployed if a company can't use it but my my druthers always to grow our business which we're now doing okay 500 branches we're now in all major cities for investment banking middle market banking etc we've been growing overseas but think about any bankers and people and stuff like that so that is my prep p2p you invest know building products and services so you're gonna see a lot more than that coming the next 12 months when I think about this and I'm very proud of what you're doing in my home city but I do say ok well Apple of pure capitalist is you know this Jamie we're shareholders we should get that money I there's no real instant payoff here within two three no it's not true I mean first of all accounting you have to be careful about but when we build a branch okay and we put a million I don't know we want to give the numbers publicly we put capital in the branch but five years later that branch could could be earning contributing to profit a million dollars a year so you know the the timetable of that new cities it's a little more complicated than we opened a branch in the city wherein but again we already serve 60 million households we want to serve 70 million we want to bring in with all the products and service we have so there there is a financial payoff it just it is not overnight but I don't worry about that I just explained to people like you that that's okay the NPV is very good and it could be negative the first year you know maybe breakdowns by the third year and then a plus hapless bog or depositors of JPMorgan we're not getting the rate that when are you gonna start paying your CD and your depositors more when rates came down the came down like this as rates came down to zero banks didn't do it so I'm rate started going up they didn't pass it on I think now you asleep you'll have other options money market funds etc but I think now as rates go up the next 25 the next 25 there's you'll see what we called beta you know how much will be passed on it'll go up and up and up well is that going to shrink profitability not I'd be worried not not really because it's we're getting or gaining deposits and the spread that you're maintaining between your cost of funds and your pain will be about the same Jamie you're talking about with the Politan just like the politicians did in 1964 you talk about a war on poverty that business seems to be doing a better job you mentioned it in the big settlements from say 2013 when attorney associate attorney general Tony West was kind of after the bank that was you be on the defensive you're playing the offensive and trying to change poverty in this country do you feel that you can do it better in the government no I think I feel you I think government and business have to do it together and it works at a local level we see it in Detroit we see it in New Orleans we see in Chicago we see in LA you see in Philadelphia with great ideas and most of the things you talk about affordable housing skills commercial development audra it's not Democrat a Republican but I think business and government together can do it business you can't do without business and business can't do without government you know government obviously is gonna play a role in both the terms of regulation and licensing and stuff like that and while America is the most prosperous nation on the planet we really have to focus on these issues about income inequality infrastructure opioid crisis lack of education Zinna state schools end up in good jobs Jamie yeah you know what you sound like when you say these things you sound like a politician I'm a patriot okay but if you're a patriot so is generalizing now we didn't know whether there's a Democrat a Republican buddy ran for president he was a patreon world war two well I'm a banker guy I'm not running I just I think it's very important that we have good policy and that we should focus on good policy and all the time and you know as you know I don't mind speaking about good policy analyze it and participate in a way to JPMorgan can so if you're in other areas or other couples will do a better job than we camps they're far more knowledgeable but in these kind of areas we can really help communities are good business skills ever really transferable to government though I think some are yeah I mean administration management leadership organization but that doesn't mean a CEO will translate to a good politician you know politicians have a whole set of different skills and you know relating to people and understanding empathy and so but it doesn't mean I would never say never that people can or can't some have done it most have they don't say never say never again it brings me back to the dial I would never say never for someone else I would not say a CEO cannot be a good president do you think it's too soon and president Trump was a CEO so you just Mir Mir Kenny Philadelphia that's something that would not I don't say frowned upon but wouldn't be believable ten years ago when bankers were it considered to be antithetical to democracy even because of President Obama what has it changed enough that now you're welcoming communities that were solid democratic areas that Democrat areas that I think really abhorred banks it's nice to be welcomed but but just so you know we never stop seeing mayors governors presidents prime ministers said it even though even people who didn't like us because we always said it isn't about they're like are we doing a good job or the legitimate complaints we should handle what should we do to make it better for people and so we never stopped doing it but it's nice that's done you know when people do like yeah okay I want to speak about the country you have been on record saying we know greatest military greatest educational system is there know the best educated the best and the worst okay well we're failing inner-city school kids half them don't graduate like in the poor neighborhoods and a lot of kids aren't getting the skills they need to have a job and so that is a feeling we should be ring ringing and alarm bell about that but we don't and I don't know why well I don't what can you do beyond what you already did what we're doing a tremendous amount in skill so what we do in skills we go to local schools like we now working a Guttman in New York to train and my wife did this by the way to train kids to be tellers $36,000 a year twelve thousand medical and pension benefits the kids like the jobs and that's the first rung then they can move up they can become a banker and live in a lot of our branch manager we're tellers and a lot of the regional manager would tell us so we could do it for ourselves but we also help schools locally well it's a high school well it's apprenticeships whether it's a community college with money but it's not just us it's all businesses need jobs locally they need special training so it really has to be done low guy should be a national point 1.5 trillion dollars in student loans 23 percent default last year supposed to be 40 percent by 2023 I know Marion Lake said look that's not really an issue for a bank but how about for a country it's a huge issue you know we that we've lent the goodness all government lending by the way you should and bad lending is bad whether it was the mortgages you make or businesses one of the things you have to do is have discipline around capital so you get a return Bridget to nowhere bad schools that don't work are bad Eleni new money people care is a it's a mistake so that student Lenny was a tremendous amount that's been done in the last seven years the folks having a hard time paying it back it's all owned by the government so it's the taxpayers gonna lose whatever hundreds of billions of dollars but it is not good because what we're seeing today is that in other lending so mortgages these kids are having a hard time getting mortgage credit card having a hard time getting a credit card is affecting the economy it's not like the mortgage crisis it's a trillion three or trillion four so it's not I wouldn't call statistical it's just unfortunate unfortunate okay let's go back to international for a second you talked about the idea of the tariff so far they you've got a skirmish but at what point would it be a war and at what point should we be worried that it's really going overboard you know I I worry about it and I just don't know you know I mean I think China has been very predictable in retaliation and I think the market kind of expected a tit-for-tat retaliation I think they're kind of expecting NAFTA to get done it could get worse from here and I just I really don't know what I hope it does I hope that they sit down have rational conversations and we have a both NAFTA which we should do cuz Canada Mexico good neighbors of ours I'm going down in Mexico later this week and with China and I don't know what the conversations are behind closed doors anymore so I I really don't know if I urge I think we should try to get well again the president raised very very very good issues we're only talking about the process boats at this conclusion I hope their process works I just think it's kind of a riskier way of the president said the problem with banker jamie dimon running for president he doesn't have the app tutor the smarts and is a poor public speaker nervous mess that doesn't sound like cooperation but how did you patch that up I mean I'm sure in the last 10 days you patched this I I have not spoken to president yeah then and and but Mike in my I made a mistake I shouldn't have yeah laugh Yap like that in which some of you were mentioned on TV but I do want to focus on policy so my view is I let's just focus on policy I shouldn't be taking no shots and having jokes at anyone's expense would you think would you put this in the case of say the London whale where you said it was the stupidest thing that wants us we used the stupidest most embarrassing situation ever been part of it's this right up there with the line and web no no I've said a lot of stupid things in my life but London well we bought some real money because what I'm thinking about is the things you're saying are common-sense things that we've not heard from bankers we've heard from bankers be on the defensive for a decade you really are saying here's how public-private partnership make not make these neighborhoods better get better since much better schools and we change our country you change it city by city you're trying but again you have a lot of guests on TV you ask most of them what they're doing a lot of these companies are doing stuff just like this there's not just JP Morgan but all these companies are part of the BRT but we actually put out a booklet of the work skills everyone's doing something and everyone's doing a lot in diversity the other things were falling behind other countries we've seen I think in total we're slipping I think the bad policy is why we've grown to 2% over the last ten years and not more and that 2% and the American public should know 20% growth in 10 years is half what it should have been it's China gonna pass us I doubt it okay we this country is blessed with things that are just way beyond those schools and you revert the good part the university is land water energy the Atlantic Pacific are the best businesses innovation but we had to sit at series of problems we fixed one an uncompetitive tax system for business that was a bad idea we have to fix immigration inner-city schools opioids we have to give Don's the chance to have a job we've got to get people back to the work skills we should double the Earned Income Tax Credit and what is that what happens I have one to point out it's reason and we should have a negative income tax of some sort make make jobs that people have because jobs give dignity jobs have better social outcomes but they need to be a living wage so I agree with that concept when I hear from folks and the Earned Income Tax Credit does that and we need to double we should double it and you have to pay more so bad Satya Nadella the CEO of Microsoft you've brought this group together Shantanu Narayan from Adobe bill McDermott from s AP I've never seen anything quite like this frankly and I've been doing this on air and and in print for a while more than a trillion dollars worth of market cap represented by you three gentlemen sitting here and you're announcing the open data initiative in the cloud Satya is this so important you know the insight that all three of us had based on the work we're doing with many customers you know we talked about coca-cola Unilever Walmart today as customers were all excited about this open data initiative it's their real insight that led us to do this which is how do we work to put them in control of their own customer data because that's the real currency any brand out there cares deeply about the continuous improvement of their own customer data is understanding and the three of us coming together is going to be central to them feeling in control of their own customer data and the idea being Microsoft with Azure Dynamics you've got a certain set of customer data adobe you've got the experience cloud you've got lots of marketing data different types of data about the customer and how companies are trying to reach out to the customer s ap you've got lots of data to a lot of it having to do with what's going on inside the company that's affecting customers outside as well so what our customer is going to be able to do and maybe bill I'll toss this one to you that they couldn't do before once you figure out this open data thing and they're able to read data across all of your platforms John there isn't a CEO in the world that does not want to have a single view of their customer and they have to connect their demand chain to their supply chain and do so in real-time so if you think about the consumer who's social mobile they're geospatial they're always on the fly they're going to shop different companies in all channels direct to consumer wholesale retail and you have to make sure that connection point with that consumer is really intimate so these companies need to be intelligent enterprises because more and more a I and predictive analytics is going to rule and how you engage with that customer but ultimately what you have to do is fulfill so now you're going to see the demand and the supply chain completely integrated and that data will be shared evenly among our companies so the customer is the major benefactor of the open data initiative we today and Shantanu you just announced that Adobe that you're buying Marketo for I think it was four point seven five billion I'll try to ask you about that a few days before you weren't ready to talk to me about it but you can talk about it now how does that move an experienced cloud and what you're trying to build there fit into this broader story well I think all three of us shared this vision of how do we enable enterprises to put customers at the front of the digital journey and Satya and Bill said getting behavioral data getting transactional data and getting customer engagement to be the front and center I think is the most important thing that enterprises can do so that digital is actually a tailwind rather than headwind what Marketo does is add to our offerings in the experience cloud of being able to create this unified profile for all customers and the thing that every customer will tell you today is that they want an engaging experience with whoever they're doing business with whether it's financial services whether it's automotive whether it's retail and Adobe focused a lot more on b2c customers but the same requirements that were true for b2c customers are now true for b2b customers and that's what Marketo provides it's actually a bunch of senior execs built from sa P that are now you know running Marketo so is this a closed party are Amazon Google Salesforce welcome to this initiative how does it work from here now that you guys know they're very clear of it the name itself should sort of tell everything it's an open data initiative you guys some technology name things all kinds of stuff spirit here is not about us it is about really unlocking the data that is our customers data about their own customers but I think what is foundational here is trust in other words ultimately customers will decide and compliance with their own customers trust in them is also going to be very key because if you think about it one of them top considerations for anything around customer data is privacy and regulation around privacy so the most important thing here would be for each vendor to think through how they participate here and ensure that there is more trust in the entirety of the value chain starting with the end consumer to the brand and to us as software vendors or you know tech companies and so I think depending on the business models I think the real challenge is going to be for some who may want to join but their business model is probably not going to allow them to join like you think it's going to be harder for an Amazon or a Google you you'll have to ask them but I think overall though what we have all anchored on is if we can create an architecture and an incentive system that turns the tide to put customers in control of their own customer data I think the overall economy will be better off no so that's what we are trying to get done if I may add to that for a second I mean what we have already demonstrated by having a common taxonomy for this customer journey meaning what meaning how you define a customer how you define the demographics how you define the lifetime value how you define their interests we have actually agreed across the companies despite the fact that we have some overlapping products in that space I think demonstrates our commitment to this open data initiative and the fact that you have customers who are excited about building on top of the foundation that we have I think gives us a lot of confidence that this is the right thing for enterprises bill he'll anything because it's gonna take take two to actually get the badge today it's the specs out on this year initiatives so that other companies can join people understand what they have to do with their platforms with their software to be compliant I think the big announcement today represents that Microsoft Adobe in SA P have already begun this journey so in terms of others wanting to join the journey we're happy to share the reference architecture around the o di initiative I do think the big story here though is trust and I think Satya and Shantanu both said it very well think about trust as the ultimate human see think about customer experience is the most important priority think about the power of getting the people inside these companies to focus clearly on what's going on outside of these companies this idea of the net present value of a more satisfied and loyal customer plus making the employees more inspired and more loyal is probably the biggest value driver that we can ever come up with I mean think about this a five percent improvement in retention is equivalent to a ninety five percent improvement in profit for most companies so if we can connect that data to their consumers and give them an unimaginably good experience what is that going to do for revenues and profits for all the companies that we care for big big breakthrough so we're talking about flexibility we're talking about efficiency and the backdrop here we've got a UN General Assembly meeting we've got something going on with the Deputy Attorney General in Washington perhaps a change happening there we've got a trade war happening between the US and China and that's arguably not the only one going on to what extent is politics having an impact on the demand for product your ability to project what what what demand is going to be out in the marketplace these days or as business just coming on as usual I mean the thing at least that we see thanks in part to the industry we participate in is digital technology is increasingly becoming pervasive when all parts of the world in all sectors of the economy and so therefore I think it's incumbent on us as the tech industry to ensure that these businesses are creating opportunity in every economy in every society because if you think about it the politics is always going to be associated with what's the well-being of any region any community in any country and as long as technology can play a role in that ultimate success in creating surplus that's equitably distributed I think these short-term bumps will work out but to me that's what it is what both I think we have a real opportunity which we are obviously sizing but you also have a responsibility to make sure the technologies benefits a broad spectrum broad spread and bill sa P a German company technically how does not being a us-based company at this time when there's a lot of trade tension between the US and Europe between the US and a lot of different countries in Asia how is that affecting the way people look at sa P when they're looking to engage with technology and build up their business well obviously we we consider ourselves a truly global software company I think that's very important distinction there is no doubt however that tensions between for example some Asian countries and the United States are pretty high right now and it's probably less so for a German company if you think about where headquarters might be located but in all seriousness I think we're focused in an all tech leaders are responsible around wanting things to work out between countries and technology companies and right now I think we all would benefit greatly from you know an environment where we stay focused on growth and to me open countries are prosperous countries and if you look at the history of the world anytime a country has been open it's actually equalled more Commerce more opportunities for everybody so we abide by that principle but there's no doubt in the ASEAN countries in particular I see a newfound strength in our business model Shantanu it feels to me like we're entering a new era in cloud where more M&A more partnerships and initiatives like this one how do you look at the market because it seems for a while big companies like you guys were holding off on doing a lot of M&A because things were expensive but your values gone up too and it seems like your pace of M&A has picked up a bit what's your take on on the market for M&A right now well first I think you know all three of us were early adopters of the cloud and recognized the benefits of more rapid innovation that we could do on the cloud of the trust and security that comes from all of this data being in the cloud but you know I think we look at it and say in order to really solve fundamental customer problems putting the onus on integration on customers to work with a number of small companies is just not going to work and that's where I think you know what we're trying to do with ODI is say if leaders in our categories can come together and make it work that's going to be extremely facilitative of companies doing it so I do think you'll see more consolidation as a result of IT professionals not wanting to integrate small systems but to rely on large companies who are innovating at a fast pace certainly if you're the same yeah I mean I think one of the things that we're really doing is bringing down the friction and improving the agility one of the interesting things that you know Bill mentioned was say the ASEAN region if you look at cloud AI and the open data initiative the idea that even a small business in Indonesia can now use Sapa Adobe and Microsoft to become that much more efficient is the real opportunity so you're bringing down that barrier to be able to use the latest and greatest technology for every business in every part of the world by really working together it's easy to get started it's easy to take data from one place to the other easy to use AI to reason over it to create new experiences and it's amazing it's in some sense we're commoditizing the technology as an input for driving business ok and on ma you expect to see an increased pace I think ma first of all if you look at all of our R&D budgets I think most people obviously gravitate towards M&A but the organic investments that each of us are making is by far the largest of course we're going to complement that supplement that with M&A where it makes sense but I think the real thing that you're seeing is growth in across all our businesses which is driven by fundamentally organic growth well it's an extraordinary moment having the three of you sitting here talking about this open data initiative Satya Nadella thanks for bringing it all together Shantanu narayan from Adobe bill McDermott frame/s AAP Thank You skies in New York back to you the market has been by virtue of the fact that we've had this record-setting run the Dow joins the the record-setting move last week the market has been able to ignore almost everything that comes out of Washington so how do you put this into the calculus today for investors I think today's event in itself probably will not will not play a big role I think the biggest risk out of Washington is basically trade escalation and potential for tariff implementation we've seen some already and we need to see what happens as far as 2019 goes from the metals have been exceptionally strong when you look at equities you've seen an extremely healthy buyback trade also that continues to support a market along with valuations that are by no means stretched so we think you have a good backdrop we just need basically need to see what happens with terms because those are a risk to 2019 numbers market was already going to be down today as a result of these reports that China canceled the meeting over over trade so we took that leg lower as I said on the Rosenstein headlines but it's it's been remarkable though that the market hasn't really cared much about trade either for more than a few hours or a day I mean when you look at when you look at earnings earnings so far have not really been there hasn't been any material impact in terms of bottom line prints and earnings so far companies are starting to talk more and more about risk around terrorists but like again not no impact on earnings thus far I think that's a risk that we're basically paying close attention to for 2019 and that's where I think you're seeing a market has been fairly fairly resilient so far we you're not working into your models trying to factor in what happens in the midterms we're only six weeks out it's very hard I mean look there is phase one has been implemented on tariffs part of phase 2 has been implemented discussion about phase 3 clearly phase 3 goes through numbers for 2019 we think will come down at least by five bucks in terms of for EPS if possibly up to 10 but again it's very hard to distinction between what's reality and what's basically noise yeah well we're gonna get the midterm elections that that's not noise I mean it's the reality of what's gonna happen the outcome is is far unknown at this point Lindsey so how do you factor it all in yeah it's definitely hard to factor and usually you see volatility increase significantly in the third quarter going into midterm elections are usually up 34 or percent we haven't seen that this year looking a lot of the different pools that are out there it seems like the Democrats are gonna take over the house which would just result in more gridlock within Congress which doesn't bode well for growth and the market going forward I don't know what could be negative about gridlock in the in the White House or in in Washington what could they do we've got the tax plan there right yeah you've got the economy that's going you know on all cylinders so why would gridlock be negative you know what I misstated I don't mean that it will be negative what I really mean is that you're not gonna see any growth policies really be pushed through there's just gonna be infighting not a lot is going to get done and you're right the market usually typically does well when there is a gridlock in the market I just don't expect increase amounts of violence there is a gridlock is good right yeah right and and I and I think that the way that Congress is is positioned now and the way that it's anticipated the election will come out which is the house with the Democrats and the Senate with the Republicans that could change but even if that happens we've got the growth policies in effect we've got regulations that haven't cut back we've got tax plan going forward so I don't see what the issue is with that I think gridlock would be fine in terms of what happens with Rosen Stein going forward I don't really see the issues there either to me maybe this is the smoking gun that allows Trump to go after Jeff Sessions and say he worked for you you should have known this you should have kept him in check even then though I think it's a momentary sell in the market but the market keeps going I'm with you I'm more concerned about inflation we're seeing used-car prices move up while oil is not part of the core still the impact of higher energy prices feeds into everything the feedstock so that's my biggest concern so the market seems to be taking a three point 10 ten-year roughly the report window in stride de Bravo your year-end targets 3,000 we're not all that far away from that level as we speak at what point do you start to get a little more bullish is there a chase for performance into into year-end do you take some comfort that these high-growth sectors which have fueled much of this rally have taken what appears to be a little bit of a backseat these value stocks that should be going up in in what is a very strong economy are finally even with tariffs industrial stocks are performing so well so we've had this price target out for now almost a year and we've had to defend it on many different occasions earlier this year where there was a lot of volatility market continues to be quite resilient I think actually the market probably would have been above 3000 already if it wasn't for trade and trade escalation and an old Terrier discussion so for us again we're really looking at 2019 right now if you look at consensus it's implying about 10 percent growth we think 11 percent is something that's achievable but again that's very months of contingent upon what happens with tariffs if we think that thing things start to converge you get some form of resolution I would say the market probably can move a lockstep with earnings for next year maybe five to ten percent but if there is getting implemented then I think we need to perhaps take a pause terrace bring the inflation and Steve's correct to identify that I think what you're seeing right now in the US ten years is that you're gonna see a move towards three and a quarter percent I also think when you look at energy right now I think the street is under invested as it relates to energy oil prices you've got Brent above $80 right now the trend for Brent's crude oil for the remainder of the year is gonna be higher and higher know myself personally I'm adding to my energy exposure I think the trend is cent there but I think there's a little bit for everyone on a day like today so yes you have some of the value names you you close the gap between growth and value over the last couple of weeks and and if you look at the market equal weight versus cap weighted okay equal weight is slightly outperforming but on a day like today there's a little bit for everyone so you've seen technology names come back a little bit today they're outperforming some of these value oriented Intex still on pace for its worst month since its March it is but but but the question is do you exhaust the the move that we've seen without tech coming back it's happened before listen it's happened before again so you might have in July and August borrowed a little bit from September I don't think that changes the overall trend for technology itself Friday you get this communication services sector so talking to a lot of hedge fund managers this weekend they're gonna lose Google they're going to lose Facebook they're gonna lose TripAdvisor they're gonna Bava is gonna go into the consumer discretionary now much much further investments how much further Josh can the market go up from here without tech joining joining me in there well we've proved that it's not necessary this this quarter healthcare is up almost 12% and industrials were up 11% and we made new record highs in the Dow last week we made a new record high in the SP on several occasions so you actually proved it already that you can have the best leading sector on a three-year basis take a pause and other sectors provided the earnings backdrop is strong and the market itself is stable can take the lead and can push the index to new high look listen retailers at multi-year highs some of them all-time highs who would have thought that was possible going back to as recently as December January so yeah it would be great if Amazon wasn't nine percent off a tie and Netflix was making new high every day and Apple was making new high-end high do you expect a rebound I'm making the point that it's okay if it's not personally I think the fattest pitch in the entire stock market right now is alphabet technically the set up here I think if you get this thing probably 20 25 points higher where really nobody is down in this stock significantly outperforming Facebook in the midst of this large cap tech drawdown alphabet is the name but but put that one idea aside the bigger picture idea and I think this was alluded to earlier actually gridlock would be phenomenal the American public told the Gallup poll recently that they prefer it including Republicans they want to check on this president at this point even if they're Republicans it's number one number two if you actually look going back to 1950 the stock market does the the third best of any outcome when you have a Republican in the White House and one house of Congress controlled by Democrats it's not the best possible scenario but it's the third no that's not negative but that's why we ask the questions to our experts about the political calculus if Rosenstein is actually fired and what the outcome could be if that could tilt the outcome at all America schools or dramatic midterms really good question if you were if you would ask me in December what's the biggest risk to the stock market I would not have said recession or earnings or any of the or oil or any of that stuff the dollar I would have said an exogenous shock caused by something in Washington where we get a Saturday night Saturday night mass massacre and everyone loses confidence in the US stock market at once I no longer believe that's the case because I think the market now expects some version of impeachment proceedings this fall not saying it'll be successful I'm not saying Trump is in trouble I'm just saying the market now expects this this is the base case that we are gonna have a vicious political know maybe maybe Jimmy the exhaustion exogenous shock is the Democrats taking both houses and I mean at some point when you got wood shop tomorrow I think that would be the shock six weeks out let's not forget it's not that way where all of those questions are gonna be asked why because it's very unexpected I mean and I'm sure you do your polls as well everybody's expecting a democratic house and a Senate Republican or choosing a Republican Senate look if they go through impeachment in that in that scenario you've got to stop in the Senate if it's Republican it goes nowhere if it's Democratic then you actually have to think about the investigations go on though let me because the big question here is what has the market priced in at least that's the big question to me we've got a divergence here that's telling us the market is pricing in a lot of bad things what's that divergence you've got killer earnings all right the last two quarters earnings have just blown the cover off the ball and expectations still go higher you mentioned that in terms of 5 to 10 percent growth this late in the cycle 5 to 10 percent growth year over year is incredible but the multiple has contracted to turns since the beginning of the year that is the markets way of saying don't know if it's tariffs don't know if it's impeachment don't know if it's in place you'd think the marketing that all in there and what they yield on the - you think the market has priced in the worst of tariffs yes no you think the market has to either I think wait let me get the punchline here ok whatever whether it's priced in all the tariffs are not Joe okay it's priced in bad news that's why we're - turns out no what has he you never get a dude the Mobile's contracted because rates have risen slowly and shortly but they had they were the yield on the - excuse me the yield on a two-year the other than ten year they've risen and as a result yeah you should not have an expanding stock market multiple you have great earnings tempered by the fact that money is not as cheap as it was okay so it's not like a rocket science wait a second it's never one thing so don't say that it's just mostly one thing and don't no it's not it's not and by the way we've got earnings season coming up there's been no pre announcements okay this looks like the feel free to make your point but let's make them go here right then I'll just summarize look you're setting up for another good earnings season third in a row what's gonna meet are we gonna have expectations on earnings continue to rise and multiples contract I don't think so it's more likely at this stage in the cycle that the multiple starts to pick up but we have that much of a disagreement on the desk as to whether tariffs are fully priced they're not president at this point last week I was talking about that there was going to be a trilateral agreement between Mexico Canada and the US and that's why the market was rally we we have not got that so far and I think as it relates to what's going on with the Chinese further implementation of these tariffs raises prices that's a problem for the US consumer that's a problem for US corporations and it is an inflationary impact but the market doesn't draw economy clearly the market doesn't think that it's going to be that punitive to earning 100 this point absolutely I said that I disagree I think what is priced in right now is a favorable outcome at some point can I kind of just come back to his point pre-announcement sleaze I'll disagree facts had put out piece on it last week saying that it's been the highest percentage of negative pre announcements since the first quarter of 2016 but you can't really have it both ways you can't say that so much is priced into the market yet strong earnings which everybody's been talking about and uniformly agrees are going to occur this quarter isn't priced in well that's the point expectations are extremely high going into the third quarter because we've had such great numbers out of the first and second quarter your the expectations are high going into third quarter you just saw the CEO Business Roundtable confidence come out today CEOs are worried about tariffs you heard ups talk about it they said it only impacted about 10 percent of their revenues so far micron mentioned it we're going to hear this word on conference call significantly we need to wait till the conference rolls right Macy's Office Depot I could go down the list are you all threat Smith and I grew that and so I think what you after pairs look CEO so do one of two things they're not going to say hey Trump's doing the wrong thing right they'll couch it and say hey we're more cautious going forward because of the cost inputs going higher to your point we had the last quarter in the quarter before that great earnings without the tariff issues and what the markets do after the quarterly announcements what they did what you did have then I want to Bravo fishes in their last time and also you got to use the numbers here two hundred billion ten percent tariffs twenty billion dollars a year on the sp500 I don't think it's going to show up I understand the concern about inflation so I'm not saying it's not there I'm saying it's small and that's in the market that's what I'm saying question whether the worst of the tariffs where them are here listen a year but you've suggested yes I did I'm standing by it you're halfway through what the maximum possible tariffs down if we don't play if you get 25 percent on another you throw in another 267 okay you're you're correct that I'm assuming rationality you've got against you now you've got the referee on you to if we continue to play a game of I'll see your 200 billion and raise you another 50 billion that's gonna be a problem for the market in 2005 go no I think I think tariffs are partially priced in I don't think entirely I think if you do go into phase 3 I mean first of all I think if they implement 25 percent on phase 2 that in itself will likely bring down some of the numbers in 19 which I don't think it's fully priced in I do think partially it is I think multiple is a function of rates at fully agree I do think that trade however is also something that's limiting the multiple from re-rating maybe not by 2x but regrading by 1x gridlock just another thing I just want to mention real quickly I do fully agree gridlock I think is a positive because out of DC last year you had a probe with agenda this year you have an anti growth so you get a gridlock I think the market likes that can I ask you this market has been driven by buybacks if the CEOs get a whiff of a slowdown in growth do you think you'll continue to see the aggressive nature of buybacks that we've seen the last couple more you need to see it even more so if that's what they need to grow earnings they would double down on by that there's no indication that they are seeing this slow hold on we had Jamie Dimon the the JPMorgan CEO on just a few moments ago with her own Jim Cramer it's a CNBC exclusive interview in Philadelphia here's what he said about the state of the economy America the economy is quite strong and and it's growing at 3% it has been now for a couple quarters and looks like that way there are no great potholes so let me very well continue no indication from Jamie Dimon sees a whole lot of stuff and the things that he looks at that we're gonna get that slowdown that you say well if we get a slowdown companies maybe gonna buy a little less of their stock back I think look at the big risk is tariffs and impact on margins I think when you look at the economy you're basically looking employment which is very strong job at strong you're finally seeing some wage inflation which is basically helping the consumers and actually there's one thing that if you look at q2 guide as most companies we're actually talking about the consumer strength right so again I don't think that the earnings picture is III don't think it's that clear that you know expect expectations have risen but I don't think they're extreme terrace is a negative but on the other side I think you have an economist what is the house view on what's the house view on the ten-year and quit and and just just the premium and how small it's gotten and and what do you think really would impact stock prices if it's not you know if we're not really gonna worry about the curve then what would we worry about I'm glad you asked that question because my next question to you was going to be we've gone you know 22 minutes here and we talked about all of these potential risk inflation I get it but the the word the Fed hasn't even been mentioned yet they're gonna be front and center this week I want to have a wild card is that and it plays right into Josh's question yes so look the the Fed hiking rates I think is a gradual negative it is eating into margins slowly but we estimated margins for instance when you look at earnings just won't get impacted entirely until Phet hikes for another at least 5200 bits if you look at interest expense and the debt levels I think the multiple is a function of yields again if yields move higher say north of three and a half three and three quarters I do think this becomes an issue but let's first get there again our house view I would say probably is more in line with the three and a quarter to three and a half now pension funds US pension funds corporate pension funds government pension funds are just insatiable buyers of tenure Treasury they're getting way heavy into private equity and so to counter that lack of liquidity it's a barbell on the other side they're going nuts on on trade which i think is the reason for this narrowing spread and not economic concern would you agree with that agree yes I've had many many PM's basically tell me asset alligators tell me 10-year yield at three percent that's a buying opportunity for like the whole world yes huge pools of because when you look at what's happening abroad with Germany Japan its so where do you think so the question that I ask people that nobody knows the answer to because we're in sea rescue for environment is where do you see restrictive policy now it used to be over five percent clearly that could be there anymore no where is it so I would say probably three and three-quarters four percent anything above that I think becomes restrictive unless we have new reasons coming out suggesting growth will accelerate but you don't have your your you know your sector waiting czar what would you recommend right now is the top three places to be in the market we've been pushing the last several months a barbell portfolio I'm sort of using the same same same term here basically we continue to like tech because we do think that the late cycle you won't have exposure to growth people pay a premium for gross car sitting but at the same time given how extreme dislocation levels have become in the market we're saying don't be naked on the value side have value anchors we like financials with like industrials we like energy but you're I guess the reason I asked you the question is by virtue of the fact that you have those sectors tech financials industrials energy growth cyclical you can't be worried about all that much no we're not we think that the business of the economic cycle is intact not just in the US but globally again I keep mentioning tariffs and trade escalation is my biggest worry for 2019 in terms of do we move sideways or do we potentially move higher by 10% when you look at the emerging markets relative to where they are versus the US is that a great opportunity on a longer-term basis we do think so we do think that emerging markets increasingly becoming a very attractive opportunity risk reward is quite attractive positioning is very negative sentiment is very negative I'm with you on this china mean is basically in a recession territory when you look at the gap between US and in China we think look there's there's a lot of interesting buying opportunities it's very difficult coming up with the catalysts and timing the catalyst but again a six-month a 12-month view we think am definitely I think the risk though on that trade well you get more reward but so much more has to go right for you to get the reward now I disagree we actually did a lot of work on this recently we had some questions from clients it turns out when you buy emerging markets as an end as a sector as an asset class after 20% declines the CNBC exclusive hey again Jeff thank you so much Karl yep we're here with Jamie Dimon Jamie this is quite a commitment to an area that frankly has gone from bank to unbanked city just pulled out over the course the last five years 50 million dollars it networked 330 banks and closed in the last ten years why why not yeah well you know with regulatory reform and tax reform where you now says 20 billion dollar thing going to many cities obviously Philadelphia is the seventh largest mark in the United States that's not including their biggest suburb called New York and you know we and we like to be part of a community we're already here in investment banking commercial banking and private banking retail is a gap so we're gonna open 50 branches 20 percent will be in LMI neighborhoods neighborhoods like this and we've come in we bring the full force of JP Morgan which is philanthropy dollars but to really help people like entrepreneur color funds affordable housing units and and we enjoy it it's good for the company and over time and where we invest the long run we never pull in and out of something talked about the multiplier effect and when you open a branch people think you know what we don't need branches anymore everything's digital yeah but brick the more works it's amazing so I think people aren't thinking clearly a million people visited branches every day the type of branch is going to change the size the branch can change they're getting smaller but more advice so the mortgage loan office in there there's a small business loan officer there's a financial adviser but your financial affairs so that change but a million people even even the average millennial visits something like three times in a quarter so to me the question of brands no more forget they'll change but you still need to serve your client the way they want to be served not the way I want to serve them as you know we've rolled out all these new products too right like like finding the online-only back well I mention this because a lot of people feel that 10 years ago one of the problems was the education the borrower the boy or did not know enough about what to do you said to be someone in there literally to help and to teach yeah well that make a difference versus say 10 years ago yeah I've told the people here when you go to these LMI neighborhoods try something special but we're gonna roll a lot of financial education tools we have you invest we're gonna roll out a self advised group and we haven't decided pricey yet so that you could advise and think of that we already put on the screen you can get your FICO score and we're gonna teach you ways and you which you can improve your FICO so that you can reduce cost a bar and stuff like that we have to do a better job not just us but the America educating people in financial matters from rainy day funds to handle you know retirement accounting and so we're making especially have to do that now it's only have things coming out that hopefully our customers will enjoy let's talk about the power of business versus the power of government the government legendarily got big settlements from the different banks 13 billion dollars from you yeah Keith Blood says that you paid a total of 44 billion did that money go into the community and did that was that the way to get things done versus the targeted way you're doing well this actually helps community I mean that some of those funds we don't actually know how they disbursed and I think one day someone should look at that and you know I kind of passed we've moved forward about how we do it for you but this is how you build a community small business lending affordable housing branches that advise people and we know that that works cities know this city philadelphia your great hometown let's take this city is doing better and better and better but parts it or not and so we do make a special effort in those parts of that city now there is a sense that lending nationally is slowed down I'm not getting that from your bank can you give us a sense of what's going on in places that frankly are unbanked and whether there is a revival that can actually move the needle field so one of one important thing these things work when you do it with civic society and government okay they don't work we're at each other so we've seen all around the world when mayors and not-for-profits businesses work together you can get people jobs you get them in train to get them employed and it actually works and so but in America America the economy is quite strong and and it's growing at 3% it has been now for a couple of quarters and looks like that way there are no great potholes so let me very well continue and so lending it there is a little bit reduction lending in middle market we don't exactly know why large corporations of course bonds public markets could clients be to flush I think you know it we do know there's an effect that through tax reform and corporations earning money they need to borrow less it's just hard to figure it ease it out but what that really means but if you took it look at employment growth people going back to work it's pretty good alright now last week you told CNBC that it's not a don't call it a trade war call it a trade skirmish previously you have said that there could be at times perhaps a slowdown or at least in the psyche because of the of any sort of trade war how do you feel about that I call it racecourse twenty billion dollars of tariffs in and of themselves are a little bit of attack if they're all gets paid as a tax in America and people do other things right they they have done supply lines but it's a twenty trillion dollar economy so that that is a negative the real negative isn't that it's confidence consistency if people start reducing investment people start moving the supply chains around that we have seen already moves the markets a little bit and so and the fear that the skirmish may become a war so we we really don't think it's a great way to go bad it could easily offset some of the benefits they've seen from regulatory reform and tax reform I won't you talking about regulate for me your Marion Lake said be something fabulous CFO that we haven't really seen genuine regulatory that would make her happy but there's been so much it's been change of attitude no yeah so I think if you when I travel around CEOs of other industries logistics steel manufacturing pipeline they've all seen it have we seen actual changes in regulation for us not really they have a long list of things they want to do there has been regulatory change for the smaller banks which we totally support to make a little bit easier for them reduce to burn them but it doesn't didn't have any to do for the bigger banks I think I mean in the public's you know we're not asking for throwing out dodd-frank we're simply people look at calibrating getting rid of duplication looking at things that hurt the mortgage markets or at this kind of market so you could enhance growth and do it safely no one's looking at you know going back to the good old days just recalibrating remember there were 2,000 rules it was like 1 or 2 was a lot and they were done in haste and people show his rash and look at cost-benefit you know what makes sense what doesn't all keeping the system safer remember growth stronger economy it also makes the financial system safer now you just mentioned no rate potholes we've got a Fed meeting that's coming up this week the spread that you would get to intend to use the typical logic that people say means that you can't make as much money and if we can't lend as much so I'm going to say that no potholes the households in good shape people going back to work fight customers sailors are fine companies of flage tax reform is still a benefit we don't have the extreme leverage we had and Oh a and and all the lending has been pretty good prime good good lending so it's not been billing but absolutely there's friction out there there's always friction you open up a newspaper any week of any month there's tons of friction and it's mounting brexit QE Turkey Argentina oh and we don't know the full effect of those things so yeah we keep our eye on that but it may not derail the economy you're gonna see separate the two I keep thinking these are all things that should play to your fortress balance sheet strength we've not seen we got European banks that are really really on the run so to speak why doesn't JP Morgan Mickey crater presents given the weakness the rest of the world well we do we're in every country and we're steady growing and we do country by country anymore bankers systems people and all the support risk legal credit compliance so our share in Europe is gone up considerably and and we're just doing for adding people and adding branches and you know the basic good old three yards and a cloud of dust well okay when I hear three RS I think you should get a higher price dirties vulnerable for Evans sake you're selling it 12 times next years we've been at this game for a long time if for your growth financial with money that's made every single day you open the door why aren't you valued like it took the blessing P company that's a question you're gonna have to answer your banks are under still under political regulatory constraints and all of that we just went through the crisis I think a lot of people's investors buy always a little worried but you're right whirring very good returns in capital we're growing you know whenever when a cycle hits obviously it could affect the bank but we will manage right through that cycle just like we did it right through the last one okay when I think about that I think that you must be in there buying stock every day for the company you've chosen a path of buying back stock shrieky but I still how many shares you have for the last ten years your share count is not going down enough when will you start getting back to level that where you really are not where you're sopping up the door supply I don't remember the exact number but our share count down like 15 percent yeah but we're doing three six versus ten years ago three five and yes yeah well there's some have been issued over time but since I've been there it's been coming down so but if you want to look at something I would prefer to spend that money not buying back stock doing this so growing our business is far better for the economy right now we don't have a lot of choices but over time I really would prefer not to buy back stock you know companies to do it would make sense I also don't buy this argument that it's bad buying back stock is simply giving it back to you an investor who then redeploys to a better use its redeployment of capital that should be redeployed if a company can't use it but my my druthers always to grow our business which we're now doing okay 500 branches we're now in all major cities for investment banking middle market banking et cetera we've been growing overseas but think about any bankers and people and stuff like that so that is my prep p2pu invest no building products and services so you're gonna see a lot more for that coming the next 12 months when I think about this and I'm very proud of what you're doing and then my home city but I do say okay well Apple of pure capitalist is you know this Jamie we're shareholders we should get that money I there's no real instant payoff here within two three years it's gonna take a long time no it's not true I mean first of all accounting you have to be careful about but when we build a branch okay and we put a mean I don't know we want to give the numbers publicly we put capital in the branch but five years later that branch could could be earning contributing to profit a million dollars a year so you know the the timetable that new cities it's a little more complicated than we open a branch the city we're in but again we already serve 60 million households we weren't to serve 70 million we want to bring them to all the products and service we have so there there is a financial payoff it just it is not overnight but I don't worry about that I just explained to people like you that that's okay the NPV is very good and it could be negative the first year you know maybe break down by the third year and then a plus apples a spark or depositors of JPMorgan we're not getting the rate that the two year when are you gonna start paying your CD and your deposit more when rates came down the came down like this as race came down to zero banks didn't do it so embrace started going up they didn't pass it on I think now you see asleep elope other options money market funds etc but I think now as rates go up the next 25 the next 25 there's you'll see what we called beta you know how much will be passed on it'll go up and up and up well is that gonna straight profitability not I'd be worried not not really because it's we're getting or gaining deposits and the spread that you're maintaining between your cost of funds and your pain would be about the same Jamie you're talking about the polity just like the politicians did in nineteen sixty four you talk about a war on poverty that business seems to be doing a better job you mentioned it in the big settlements from say 2013 when attorney associate attorney general Tony West was kind of after the bank that was you be on the defensive you're playing the offense have been trying to change poverty in this country do you feel that you can do it better in the government no I think I feel yeah I think government and business have to do it together and it works at a local level we see it in Detroit we see it in New Orleans we see in Chicago we see in LA you see in Philadelphia with great ideas and most of the things you talk about affordable housing skills commercial development Audra that's not democrat a republican but i think business and government together can do it business you can't do without business and business can't do without government you know government obviously is gonna play a role in both the terms of regulation and licensing and stuff like that and while America is the most prosperous nation the planet we really have to focus on these issues about income inequality infrastructure opioid crisis lack of education Zinna state schools end up in good jobs Jamie yeah you know what you sound like when you say these things you sound like a politician I'm a patriot okay but if you're a patriot so was generalizing now we didn't know whether there's democrat or republican but he ran for president cuz he was a patreon world war two well I'm a banker I'm not running I just I think it's very important that we have a good policy and that we should focus on good policy and all the and you know as you know I don't mind speaking about good policy analyze it and participate in a way that JPMorgan can so if you're in other areas or other couples will do a better job than we camp they're far more knowledgeable but in these kind of areas we can really help communities are good business skills ever really transferable to government though I think some are yeah I mean administration management leadership organization but that doesn't mean a CEO will translate to a good politicians you know politicians have a whole set of different skills and you know relating to people and understanding empathy and so but it doesn't mean I would never say never that people can or can't some have done it most have no say never say never again it brings me back to the dial I would never say never for someone else I would not say a CEO cannot be a good president do you think it's too soon and President Trump was a CEO so you just met mere American teacher in Philadelphia that's something that would not I don't say frowned upon but wouldn't be believable ten years ago when bankers were considered to be antithetical to democracy even because of President Obama what has it changed enough that now you're welcoming communities that were solid Democratic areas that Democrat areas that I think really abhorred Bank it's nice to be welcomed but but just so you know we never stop seeing mayors governors presidents prime ministers Senate even though even people who didn't like us because we always said it isn't about they like it are we doing a good job or the legitimate complaints we should handle what should we do to make it better for people and so we never stopped doing it but it's nice that's done you know when people do like you okay I want to speak about the country you have been on record saying we know greatest military greatest educational system is there the best educated the best and the worst okay well we're failing inner-city school kids half them don't graduate like in the poor neighborhoods and a lot of kids aren't getting the skills they need to have a job and so that is a feeling we should be ring ringing an alarm bell about that but we don't and I don't know why well why don't what can you do beyond what you already did what we're doing a tremendous amount in skill so what we do in skills we go to local schools like we now working the government in New York to train if my wife did this by the way to train kids to be tellers $36,000 a year twelve thousand medical and pension benefits the kids like the jobs and that's the first rung then they can move up they could become a banker and live in a lot of our branch manager we're tellers and a lot of the regional managers would tell us so we could do it for ourselves but we also help schools locally well it's a high school well it's apprenticeships whether it's a community college with money but it's not just us it's all businesses need jobs locally they need special training so it really has to be done logo should be a national toy 1.5 trillion dollars in student loans 23% default list you're supposed to be 40 percent by 2023 I know Marian Lake said look that's not really an issue for a bank but how about for a country it's a huge issue you know we that we've lent the it's all government lending by the way you should and bad lending is bad weather was the mortgages you make or businesses one of the things you have to do is have discipline around capital so you get a return Bridget to nowhere are bad schools that don't work are bad lending to money people cap here is a it's a mistake so that student Lenny was a tremendous amount that's been done in the last seven years the folks having a hard time paying it back it's all owned by the government so it's the taxpayers gonna lose whatever hundreds of billions of dollars but it is not good because what we're seeing today is that in other lending so mortgages these kids are having a hard time getting mortgage credit card they having a hard time getting a credit card so it is affecting the economy it's not like the mortgage crisis it's a trillion three or three and four so it's not I wouldn't call that Mitchell it's just unfortunate unfortunate okay let's go back to international for a second you talked about the idea the tower so far they you know you've got a skirmish but at what point would it be a war and at what point should we be worried that it's really going overboard you know I I worry about it and I just don't know you know I mean I think China has been very predictable in retaliation and I think the market kind of expected a tit-for-tat retaliation I think they're kind of expecting NAFTA take to get done it could get worse from here and I just I really don't know what I hope it does I hope that they sit down and rational conversations and we have a both NAFTA which we should do cuz Canada and Mexico good neighbors of ours I'm going down in Mexico later this week and with China and I don't know what the conversations are behind closed doors anymore so I I really don't know if I urge I think we should try to get well again the president raised very very very good issues we're only talking about the Rosberg did his conclusion I hope their process works I just think it's kind of a riskier way of the president said the problem with banker jamie dimon running for president he doesn't have the app tutor the smarts and is a poor public speaker nervous mess that doesn't sound like cooperation how did you patch that up I mean I'm sure in the last 10 days you patched this I I have not spoken to President yeah then and and but my talk in my I made a mistake I should have yeah laughs Yap like that in which some of you were mentioned on TV but I do want to focus on policy so my view is let's just focus on policy I shouldn't be taking no shots and having jokes at anyone's expense well would you think would you put this in the case of say the London whale where you said it was the stupidest thing that wants us we used the stupidest most embarrassing situation ever been part of it's just right up there with the line in web no no I've said a lot of stupid things in my life the London whale we bought some real money things you're saying are common-sense things that we've not heard from bankers we've heard from bankers be on the defensive for a decade you really are saying here's how public-private partnership make not make these neighborhoods better get better since much better schools and we change our country you change it city by city you're trying but again you have a lot of guests on TV you ask most of them what they're doing a lot of these companies are doing stuff just like this there's not just JP Morgan but all these companies are part of the BRT but we actually put out a booklet of the work skills everyone's doing something and everyone's doing a lot in diversities other things were falling behind other countries we've seen I think in total we're slipping I think the bad policy is why we've grown to two percent over the last ten years and not more and that two percent and the American publisher no 20 percent growth in 10 years is half what it should have been it's China that it passes I doubt it okay we this country is blessed with things that are just way beyond those schools and your reverse the good part the university is land water energy the Atlantic Pacific are the best businesses innovation but we had to sit at series of problems we fixed one an uncompetitive tax system for business I that was a bad idea we have to fix immigration inner-city schools opioids we have to get down as a chance to have a job we got to get people back to the work skills we should double the Earned Income Tax Credit and what does everyone have one to point out is reason and we should have a negative income tax of some sort make make jobs that people have because jobs give dignity jobs have better social outcomes but they need to be a living wage so I agree with that concept when I hear from folks and the Earned Income Tax Credit does that and we need to double we should double it and you have to pay more so be it Satya Nadella the CEO of Microsoft you've brought this group together Shantanu Narayan from Adobe bill McDermott from sa P I've never seen anything quite like this frankly and I've been doing this on air and and in print for a while more than a trillion dollars worth of market cap represented by you three gentlemen sitting here and you're announcing the open data initiative in the cloud Satya why is this so important you know the insight that all three of us had based on the work we're doing with many customers you know we talked about coca-cola Unilever Walmart today as customers were all excited about this open data initiative it's their real insight that led us to do this which is how do we work to put them in control of their own customer data because that's the real currency any brand out there cares deeply about the continuous improvement of their own customer data as understanding and the three parts coming together is going to be central to them feeling in control of their own customer data and the idea being Microsoft with Azure Dynamics you've got a certain set of customer data Adobe you've got the experience cloud you've got lots of marketing data different types of data about the customer and how companies are trying to reach out to the customer s ap you've got lots of data - a lot of it having to do with what's going on inside the company that's affecting customers outside as well so what our customer is going to be able to do and maybe bill I'll toss this one to you that they couldn't do before once you figure out this open data thing and they're able to read data across all of your platforms Jon there isn't a CEO in the world that does not want to have a single view of their customer and they have to connect their demand change to the supply chain and do so in real-time so if you think about the consumer whose social mobile they're geospatial they're always on the fly they're gonna shop different companies in all channels direct-to-consumer wholesale retail and you have to make sure that connection point with that consumer is really intimate so these companies need to be intelligent enterprises because more and more a I and predictive analytics is going to rule and how you engage with that customer but ultimately what you have to do is fulfill so now you're gonna see the demand and the supply chain completely integrated and that data will be shared evenly among our companies so the customer is the major benefactor of the open data initiative we announced today and Shantanu you just announced that Adobe that you're buying Marketo for I think it was four point seven five billion I'll try to ask you about that a few days before you weren't ready to talk to me about it but you can talk about it now how does that move an experienced cloud and what you're trying to build there fit into this broader story well I think all three of us shared this vision of how do we enable enterprises to put customers at the front of the digital journey and Satya and Bill said getting behavioral data getting transactional data and getting customer engagement to be the front and center I think is the most important thing that enterprises can do so that digital is actually a tailwind rather than headwind what Marketo does is add to our offerings in the experience cloud of being able to create this unified profile for all customers and the thing that every customer will tell you today is that they want an engaging experience with whoever they're doing business with whether it's financial services whether it's automotive whether it's retail and Adobe focused a lot more on b2c customers but the same requirements that were true for b2c customers are now true for b2b customers and that's what Marketo provides it's actually a bunch of senior execs built ASAP that are now you know running market also is this a closed party are Amazon Google Salesforce welcome to this initiative how does it work from here now that you guys are in today they're very clear but the name itself should sort of tell everything it's an open data initiative you guys some technology name things all kinds of stuff spirit here is not about us it is about really unlocking the data that is our customers data about their own customers but I think what is foundational here is trust in other words ultimately customers will decide and compliance with their own customers trust in them is also going to be very key because if you think about it one of them top considerations for anything around customer data is privacy and regulation around privacy so the most important thing here would be for each vendor to think through how they participate here and ensure that there is more trust in the entirety of the value chain starting with the end consumer to the brand and to us as software vendors or you know tech companies and so I think depending on the business models I think the real challenge is going to be for some who really want to join but their business model is probably not going to allow them to join like you think it's gonna be harder for an Amazon or a Google you'll have to ask them but I think overall though what we have all anchored on is if we can create an architecture an incentive system that turns the tide to put customers in control of their own customer data I think the overall economy will be better off now so that's what we are trying to get done John if I may add to that for a second I mean what we have already demonstrated by having a common taxonomy for this customer journey meaning what meaning how you define a customer how you define the demographics how you define the lifetime value how you define their interests we have actually agreed across the companies despite the fact that we have some overlapping products in that space I think demonstrates our commitment to this open data initiative and the fact that you have customers who are excited about building on top of the foundation that we have I think gives us a lot of confidence that this is the right thing for enterprises bill how long do you think this is going to take take - to actually get the monster date it's the specs out on this year initiatives so that other companies can join people understand what they have to do with their platforms with their software to be compliant I think the big announcement today represents that Microsoft Adobe NS ap have already begun this journey so in terms of others wanting to join the journey we're happy to share the reference architecture around the ODI initiative I do think the big story here though is trust and I think Satya and Shantanu both said it very well think about Trust is the ultimate human currency think about customer experience is the most important priority think about the power of getting the people inside these companies to focus clearly on what's going on outside of these companies this idea of the net present value of a more satisfied and loyal customer plus making the employees more inspired and more loyal is probably the biggest value driver that we can ever come up with let me think about this a 5% improvement in retention is equivalent to a 95 percent improvement in profit for most companies so if we can connect that data to their consumers and give them an unimaginably good experience what is that going to do for revenues and profits for all the companies that we care for big big breakthrough ok we're talking about flexibility we're talking about efficiency and the backdrop here we've got a UN General Assembly meeting we've got something going on with the Deputy Attorney General in Washington perhaps a change happening there we've got a trade war happening between the US and China and that's arguably not the only one going on to what extent is politics having an impact on the demand for product your ability to project what what what demand is going to be out in the marketplace these days or as business just coming on as usual Oh the thing at least that we see thanks in part to the industry we participate in is digital technology is increasingly becoming pervasive in all parts of the world in all sectors of the economy and so therefore I think it's incumbent on us as the tech industry to ensure that these businesses are creating opportunity in every economy in every society because if you think about it the politics is always going to be associated with what's the well-being of any region any community in any country and as long as technology can play a role in that ultimate success in creating surplus that's equitably distributed I think these short-term bumps will work out but to me that's what it is what both I think we have a real opportunity which we are obviously exercising but we also have a responsibility to make sure the technologies benefits a broad spectrum broad spread and bill sa P a German company technically how does not being a us-based company at this time when there's a lot of trade tension between the US and Europe between the US and a lot of different countries in Asia how is that affecting the way people look at sa P when they're looking to engage with technology and build up their business well obviously we we consider ourselves a truly global software company I think that's very important distinction there is no doubt however that tensions between for example some Asian countries and the United States are pretty high right now and it's probably less so for a German company if you think about where headquarters might be located but in all seriousness I think we're focused in an all tech leaders are responsible around wanting things to work out between countries and technology companies and right now I think we all would benefit greatly from you know an environment where we stay focused on growth and to me open countries are prosperous countries and if you look at the history of the world any time a country has been open it's actually equalled more Commerce more opportunities for everybody so we abide by that principle but there's no doubt in the ASEAN countries in particular I see a newfound strength in our business model Shantanu it feels to me like we're entering a new era in cloud where more M&A more partnerships and initiatives like this one how do you look at the market because it seems for a while big companies like you guys were holding off on doing a lot of M&A because things were expensive but your values gone up too and it seems like your pace of M&A has picked up a bit what's your take on on the market for M&A right now well first I think you know all three of us were early adopters of the cloud and recognized the benefits of more rapid innovation that we could do on the cloud of the trust and security that comes from all of this data being in the cloud but you know I think we look at it and say in order to really solve fundamental customer problems putting the onus on integration on customers to work with a number of small companies is just not going to work and that's where I think you know what we're trying to do with ODI is say if leaders in our categories can come together and make it work that's going to be extremely facilitative of companies doing it so I do think you'll see more consolidation as a result of IT professionals not wanting to integrate small systems but to rely on large companies who are innovating at a fast pace certainly if you're the same yeah I mean I think one of the things that we're really doing is bringing down the friction and improving the agility one of the interesting things that you know Bill mentioned was say the ASEAN region if you look at cloud AI and the open data initiative the idea that even a small business in Indonesia can now use sa P Adobe and Microsoft to become that much more fishing is the real opportunity so you're bringing down that barrier to be able to use the latest and greatest technology for every business in every part of the world by really working together ah it's easy to get started it's easy to take data from one place to the other easy to use AI to reason over it to create new experiences and it's amazing it's in some sense we are commoditizing the technology as an input for driving business ok and on ma you expect to see an increased pace I think ma first of all if you look at all of our R&D budgets I think most people obviously gravitate towards M&A but the organic investments that each of us are making is by far the largest of course we are going to complement that supplement that with M&A where it makes sense but I think the real thing that you're seeing is growth in across all our businesses which is driven by fundamentally organic growth well it's an extraordinary moment having the three of you sitting here talking about this open data initiative Satya Nadella thanks for bringing it all together Shantanu narayan from Adobe bill McDermott frame/s ap thank you skies in New York back to you the market has been by virtue of the fact that we've had this record-setting run the Dow joins the the record-setting move last week the market has been able to ignore almost everything that comes out of Washington so how do you put this into the calculus today for investors I think today's event in itself probably will not will not play a big role I think the biggest risk out of Washington is based between escalation and potential for tariff implementation we've seen some already and we need to see what happens as far as 2019 goes fundamentals have been exceptionally strong when you look at equities you've seen an extremely healthy buyback trade also that continues to support the market along with valuations that are by no means stretched so we think you have a good backdrop we just named basically need to see what happens with tariffs because those are a risk to 2019 numbers market was already going to be down today as a result of these reports that China cancelled the meeting over over trade so we took that leg lower as I said on the Rosenstein headlines but it's it's been remarkable though that the market hasn't really cared much about trade either for more than a few hours or a day I'm when you look at when you look at earnings earnings so far have not really been there hasn't been any material impact in terms of bottom line prints and earnings so far companies are starting to talk more and more about risk around terrorists but like again not no impact on earnings thus far I think that's a risk that we're basically paying close attention to for 2019 and that's where I think you're seeing a market it has been by virtue of the fact that we've had this record-setting run the Dow joins the the record-setting move last week the market has been able to ignore almost everything that comes out of Washington so how do you put this into the calculus today for investors I think today's event in itself probably will not will not play a big role I think the biggest risk out of Washington is basically trade escalation and potential for tariff implementation we've seen some already and we need to see what happens as far as 2019 goes from the metals have been exceptionally strong when you look at equities you've seen an extremely healthy buyback trade also that continues to support the market along with valuations that are by no means stretched so we think you have a good backdrop we just need basically need to see what happens with tariffs because those are a risk to 2019 numbers market was already going to be down today as a result of these reports that China cancelled the meeting over over trade so we took that leg lower as I said on the Rosenstein headlines but it's it's been remarkable though that the market hasn't really cared much about trade either for more than a few hours or a day I mean when you look at when you look at earnings earnings so far have not really been there hasn't been any material impact in terms of bottom line prints and earnings so far companies are starting to talk more and more about risk around tariffs but like again not no impact on earnings thus far I think that's a risk that we're basically paying close attention to for 2019 and that's where I think you're seeing a market has been fairly fairly resilient so far we you're not working into your models trying to factor in what happens in the midterms we're only six weeks out it's very hard I mean look there is phase one has been implemented on tariffs part of phase 2 has been implemented discussion about phase 3 clearly phase 3 goes through numbers for 2019 we think will come down at least by five bucks in terms of for EPS if possibly up to ten but again it's very hard to distinction between what's reality and what's basically noise yeah well we're gonna get the midterm elections that that's not noise I mean it's the reality of what's going to happen the outcome is is far unknown at this point Lindsey so how do you factor all in yeah it's definitely hard to factor in usually you see volatility increased significantly in the third quarter going into midterm elections are usually up 34% we haven't seen that this year looking a lot of the different polls that are out there it seems like the Democrats are gonna take over the house which would just result in more gridlock within Congress which doesn't bode well for growth and the market going forward I don't know what could be negative about gridlock in the in the White House or in in Washington what could they do we've got the tax plan there right yeah I've got the economy that's going you know on all cylinders so why would gridlock be negative you know what I misstated I don't mean that it will be negative what I really mean is that you're not going to see any growth policies really be pushed through there's just gonna be infighting not a lot is going to get done and you're right the market usually typically does well when there is a gridlock in the market I just don't expect increase amounts of there is the same gridlock is good right yeah right and and I and I think that the way that Congress is is positioned now and the way that it's anticipated the election will come out which is the house with the Democrats and the Senate with the Republicans that could change but even if that happens we've got the growth policies in effect we've got regulations that have been cut back we've got tax plan going forward so I don't see what the issue is with that I think gridlock would be fine in terms of what happens with Rosen Stein going forward I don't really see the issues there either to me maybe this is the smoking gun that allows Trump to go after Jeff Sessions and say he worked for you you should have known this you should have kept him in check even then though I think it's a momentary sell in the market but the market keeps going I'm with you I'm more concerned about inflation we're seeing used-car prices move up while oil is not part of the core still the impact of higher energy prices feeds into everything the feed stock so that's my biggest concern so the market seems to be taking a 3.10 ten-year roughly instructor Bravo your year-end targets 3000 we're not all that far away from that level as we speak at what point do you start to get a little more bullish is there a chase for a performance into into year end do you take some comfort that these high-growth sectors which have fueled much of this rally have taken what appears to be a little bit of a backseat these value stocks that should be going up in in what is a very strong economy are finally even with tariffs industrial stocks are performing so well so we've had this price target out for now almost a year and we've had to defend it on many different occasions earlier this year when there was a lot of volatility market continues to be quite resilient I think actually the market probably would have been above 3000 already if it wasn't for trade and trade escalation and an old Terra discussion so for us again we're really looking at 2019 right now if you look at consensus it's implying about 10 percent growth we think 11 percent is something that's achievable but again that's very much of contingent upon what happens with tariffs if we think that thing things start to converge you get some form of resolution I would say the market probably can move a lockstep with earnings for next year maybe five to ten percent but if Terrance getting implemented then I think we need to perhaps take a pause tariffs bring the inflation and Steve's correct to identify that I think what you're seeing right now in the u.s. 10 years that you're gonna see a move towards three and a quarter percent I also think when you look at energy right now I think the street is under invested as it relates to energy oil prices you've got Brent above $80 right now the trend for Brent crude oil for the remainder of the year is gonna be higher and higher know myself personally I'm adding to my energy exposure I think the trend is sent there but I think there's a little bit for everyone on a day like today so yes you have some of the value names you you close the gap between growth and value over the last couple of weeks and if you look at the market equal weight versus cap-weighted okay equal weight is slightly outperforming but on a day like today there's a little bit for everyone so you seen technology names come back a little bit today they're outperforming some of these value oriented in text still on pace for its worst month since its March it is but but but the question is do you exhaust the the move that we've seen without tech coming back it's happened before listen it's happened before again so you might have in July and August borrowed a little bit from September I don't think that changes the overall trend for technology itself Friday you get this communication services sector so talking to a lot of hedge fund managers this weekend they're gonna lose Google they're going to lose Facebook they're gonna lose TripAdvisor they're gonna Baba's gonna go into the consumer discretionary now much much further investment how much further Joss can the market go up from here without tech joining Joey we've we've proved that it's not necessary this this quarter healthcare is up almost 12% and industrials were up 11% and we made new record highs in the Dow last week we made a new record high in the SP on several occasions so you actually proved it already that you can have the best leading sector on a three-year basis take a pause and other sectors provided the earnings backdrop is strong and the market itself is stable can take the lead and can push the index the new hi look listen retailers at multi-year highs some of them all-time highs who would have thought that was possible going back to as recently as December January so yeah it would be great if Amazon wasn't nine percent off a tie and Netflix was making new high every day and Apple was making new high-end you expect what I you expect a rebound I'm making the point that it's okay if it's not personally I think the fattest pitch in the entire stock market right now is alphabet technically the set up here I think if you get this thing probably 20 25 points higher we're really nobody is down in this stock significantly outperforming Facebook in the midst of this large cap tech drawdown alphabet is the name but but put that one idea aside the bigger picture idea and I think this was alluded to earlier actually gridlock would be phenomenal the American public told the Gallup poll recently that they prefer it including Republicans they want to check on this president at this point even if they're Republicans it's number one number two if you actually look going back to 1950 the stock market does the the third best of any outcome when you have a Republican in the White House and one house of Congress controlled by Democrats it's not the best possible scenario but it's the third no that's not negative but that's why we ask the questions to our experts about the political calculus if Rosenstein is actually fired what the outcome could be if that could tilt the outcome at all-america schools or dramatically midterms that's a really good question if you were if you would ask me in December what's the biggest risk to the stock market I would not have said recession or earnings or any of the oil or any of that stuff the dollar I would have said an exogenous shock caused by something in Washington where we get a Saturday night Saturday night mass massacre and everyone loses confidence in the US stock market at once I no longer believe that's the case because I think the market now expects some version of impeachment proceedings this fall not saying it'll be successful I'm not saying Trump is in trouble I'm just saying the market now expects this this is the base case that we are going to have a vicious political no maybe maybe Jimmy the exogenous shock is the Democrats taking both houses and I mean at some point when you got wood shop tomorrow I think that would be the shock six weeks out let's not forget it's not that way where all of those questions are gonna be asked why if because it's very unexpected I mean and I'm sure you do your polls as well everybody's expecting a democratic house and a Senate Republican or choosing a Republican Senate look if they go through impeachment in that in that scenario you've got to stop in the Senate if it's Republican it goes nowhere if it's Democratic then you actually have to think about the investigations go on though let me you're good because the big question here is what has the market priced in at least that's the big question to me we've got a divergence here that's telling us the market is pricing in a lot of bad things what's that divergence you've got killer earnings all right the last two Kearney quarters earnings have just blown the cover off the ball and expectations still go higher you mentioned that in terms of five to ten percent growth this late in the cycle five to ten percent growth year over year is incredible but the multiple has contracted two turns since the beginning of the year that is the markets way of saying don't know if it's tariffs don't know if it's impeachment don't know if it's in place you'd think the marketing that all in there and what because they yelled on the - you think the market has priced in the worst of tariffs yes no you think the market has price because you're disagreeing so either I think far wait let me get the punchline okay whatever whether it's priced in all the tariffs are not Joe okay it's priced in bad news that's why we're - turns out no what has he you're never gonna finish dude the Mobile's contracted because rates have risen slowly and shortly but they had they were the yield on the - e-excuse me the yield on a two-year the other than ten year they've risen and as a result yeah you should not have an expanding stock market multiple you have great earnings tempered by the fact that money is not as cheap as it was okay so it's not like a rocket science wait a second it's never one thing so don't say that it's just mostly one and don't no it's not it's not and by the way we've got earnings season coming up there's been no pre announcements okay this looks like pre announcer feel free to make your points but let's make them go hearing you right then I'll just summarize look you're setting up for another good earnings season third in a row what's gonna meet are we gonna have expectations on earnings continue to rise and multiples contract I don't think so it's more likely at this stage in the cycle that the multiple starts to pick up but we have that much of a disagreement on the desk as to whether tariffs are fully priced they're not president the at this point last week I was talking about that there was going to be a trilateral agreement between Mexico Canada and the US and that's why the market was rally we we have not got that so far and I think as it relates to what's going on with the Chinese further implementation of these tariffs raises prices that's a problem for the US consumer that's a problem for US corporations and it is an inflationary impact for the market economy clearly the market doesn't think that it's going to be that punitive to earning 100 this point absolutely I said that I disagree I think what is priced in right now is a favorable outcome at some point can I can I just come back to his point pre-announcement see I'll disagree facts I'd put out a piece on it last week saying that it's been the highest and the percentage of negative pre announcements since the first quarter of 2016 but you can't really have it both ways you can't say that so much is priced into the market yet strong earnings which everybody's been talking about and uniformly agrees are going to occur this quarter isn't priced in well that's the point expectations are extremely high going into the third quarter because we've had such great numbers out of the first and second quarter your the expectations are high going into the third quarter you just saw the CEO Business Roundtable confidence come out today CEOs are worried about tariffs you heard ups talk about it they said it only impacted about 10 percent of their revenues so far micron mentioned it we're going to hear this word on conference calls significantly we don't even need to wait to the conference right right Macy's Office Depot I could go down the list argue all the red Smith and I grew that and so I think what you have two pairs look CEOs who do one of two things they're not going to say hey Trump's doing the wrong thing right they'll couch it and say hey we're more cautious going forward because of the cost inputs going higher to your point we had the last quarter in the quarter before that great earnings without the tariff issues and what the markets do after the quarterly announcements what they did what you did have a point and then I want to profit are fishes in there last time and also you got to use the numbers here 200 billion 10 percent tariffs 20 billion dollars a year on the S&P 500 I don't think it's going to show up I understand the concern about inflation so I'm not saying it's not there I'm saying it's small and that's in the market that's what I'm saying question whether the worst of the tariffs where the marker listen but you suggested yes I did I'm standing by it you're halfway through what the maximum possible tariffs now if we don't play if you get 25 percent on another you throw in another 267 okay you're you're correct that I'm assuming rationality you've got the rest against you now you've got the referee on you tell if we continue to play a game of I'll see your 200 billion and raise you another 50 billion that's going to be a problem for the market in 2000 tariffs are off go no I think I think Terrans are partially priced in I don't think entirely I think if you do go into phase 3 I mean first of all I think if they implement 25% on phase 2 that in itself will likely bring down some of the numbers in 19 which I don't think it's fully priced in I do think partially it is I think multiple is a function of rates at fully agree I do think that trade however is also something that's limiting the multi from rereading maybe not by 2x but regrading by 1x gridlock just another thing I just want to mention real quickly I do fully agree gridlock I think is a positive because out of DC last year you had a pro-growth agenda this year you have an anti growth so you get a gridlock I think the market likes that can I ask you this market has been driven by buybacks if the CEOs get a whiff of a slowdown in growth do you think you'll continue to see the aggressive nature of buybacks that we've seen the last couple more you need to see it even more so if that's what they need to grow earnings they would double down on by that there's no indication that they are seeing this slow hold on we had Jamie Dimon the the JPMorgan CEO on just a few moments ago with our own Jim Cramer it's a CNBC exclusive interview in Philadelphia here's what he said about the state of the economy America the economy is quite strong and and it's growing at 3% it has been now for a couple of quarters and looks like that way there are no great potholes so let me very well continue no indication from Jamie Dimon sees a whole lot of stuff in the things that he looks at that we're gonna get that slowdown that you say well if we get a slowdown companies maybe gonna buy a little less of their stock back I think look at the big risk is tariffs and the impact on margins I think when you look at the economy you're basically looking employment which is a very strong job at strong you're finally seeing some wage inflation which is basically helping the consumers and actually there's one thing that if you look at q2 guy and as most companies we're actually talking about the consumer strength right so again I don't think that the earnings picture is I I don't think it's that clear that you know expect expectations have risen but I don't think they're extreme terraces are negative but on the other side I think you have in economies what is the house view on what's the house view on the ten-year and quite and and just just the premium and how small it's gotten and and what do you think really would impact stock prices if it's not you know if we're not really gonna worry about the curve then what would we worry about I'm glad you asked that question because my next question to you was going to be we've gone you know 22 minutes here and we talked about all of these potential risks inflation I get it but the the word the Fed hasn't even been mentioned yet they're gonna be front and center this week how much of a wild card is that and it plays right into Josh's yes so look that the Fed hiking rates I think is a gradual negative it is eating into Marge's slowly but we estimated margins for instance when you look at earnings margins won't get impacted entirely until Fed hikes for another at least fifty two hundred bits if you look at interest expense and the debt levels I think the multiple is a function of yields again if yields move higher say north of three and a half three and three-quarters I do think this becomes an issue but let's first get there again our house view I would say probably is more in line with the three and a quarter three and a half now pension funds US pension funds corporate pension funds government pension funds are just insatiable buyers of ten year Treasury they're getting way heavy into private equity and so to counter that lack of liquidity it's a barbell on the other side they're going nuts on on Troy which I think is the reason for this narrowing spread and not economic concern would you agree with that would agree yes I have many many PM's basically tell me asset alligators tell me 10-year yield at three percent that's a buying opportunity for like the whole world yes huge pools of because when you look at what's happening abroad with Germany Japan it's so where do you think so the question I asked people that nobody knows the answer to because we're in sea rescue for environment is where do you see restrictive policy now it used to be over five percent clearly that could be there anymore no where is it so I would say probably three and three-quarters four percent anything above that I think becomes restrictive unless we have new reasons coming out suggesting growth will accelerate but you don't have your your you know your sector waiting's are what would you recommend right now is the top three places to be in the market we've been pushing the last several months a barbell portfolio I'm sort of using the same same same term here basically we continue to like tech because we do think that late cycle you won't have exposure to growth people pay a premium for gross car city but at the same time given how extreme dislocation levels have become in the market we're saying don't be naked on the value side have value anchors we like financials we like industrials we like energy but your I guess the reason I asked you the question is by virtue of the fact you have those sectors tech financials industrials energy growth cyclical you can't be worried about all that no we're not we think that the business suckled economic cycle is intact not just in the US but globally again I keep mentioning tariffs and trade escalation is my biggest worry for 2019 in terms of do we move sideways or do we potentially move higher by 10 percent when you look at the emerging markets relative to where they are versus the US is that a great opportunity on a longer-term basis we do think so we do think that emerging markets increasingly becoming a very attractive opportunity risk reward is quite attractive positioning is very negative sentiment is very negative I'm with you on this China I mean is basically in a recession territory when you look at the gap between US and in China we think look there's there's a lot of interesting buying opportunities it's very difficult coming up with the catalyst and timing the catalyst but again a six-month a 12-month view we think am definitely I think the risk though on that trade well you get more reward but so much more has to go right for you to get the reward now I disagree we actually did a lot of work on this recently we had some questions from clients it turns out when you buy emerging markets as Anand as a sector as an asset class after 20% declines the CNBC exclusive hey again Jeff thank you so much Karl yep we're here with Jamie Dimon Jamie this is quite a commitment to an area that frankly has gone from bank to unbanked City just pulled out over the course the last five years 50 million dollars and network 330 banks have closed in the last 10 years why why not yeah well you know with regulatory reform and tax reform where you now says 20 billion dollar thing going to many cities obviously Philadelphia is the seventh largest mark in the United States that's not including their biggest suburb called New York and you know we and we like to be part of a community we're already here in investment banking commercial banking and private banking retail is a gap so we're gonna open 50 branches 20 percent will be in LMI neighborhoods neighborhoods like this and we've come in we bring the full force of JP Morgan which is philanthropy dollars but to really help people like entrepreneur color funds affordable housing units and and we enjoy it it's good for the company and over time and we're we invest the long-run we never pull in and out of something talk about the multiplier effect and when you open a branch people think you know what we don't need branches anymore everything's digital yeah but brick the more works it's amazing so I think people aren't thinking clearly a million people visited branches every day the type of branch is going to change the size the branch contains again smaller but more advice so there's a mortgage loan office in there there's a small business loan officer there's a financial adviser but your financial affairs so that'll change but a million people even even the average millennial visits something like three times a quarter so to me the question of brands no more forget they'll change but you still need to serve your client the way they want to be served not the way I want to serve them as you know we've rolled out all these new products too right like like finding the online only bank well maybe mention this because a lot of people feel that 10 years ago one of the problems was the education the borrower the wire or did not know enough about what to do you said to be someone in there literally to help and to teach yeah well that make a difference versus say 10 years ago yeah I've told the people here when you go to these LMI neighborhoods try something special but we're gonna roll a lot of financial education tools we have you invest we're gonna roll out a self advised group and we haven't decided on pricey yet so that you could advise and think of that we already put on the screen you can get your FICO score and we're going to teach you ways and you which you can improve your FICO so that you can reduce cost a bar and stuff like that we have to do a better job not just us but the America educating people in financial matters from rainy day funds to handling you know retirement account and so we're making it special I have to do that now it's many of things coming out then hopefully our customers will enjoy let's talk about the power of business versus the power of government the government legendarily got big settlements from different banks 13 billion dollars from you yeah Keith Blood says that you paid a total of 44 billion did that money go into the community and did that was that the way to get things done versus the targeted way you're doing well this actually ups community I mean that some of those funds we don't actually know how they dispersed and I think one day someone should look at that and that kind of past we've moved forward about how we do it but you but this is how you build a community small business lending affordable housing branches that advise people and we know that that works cities know this City Philadelphia your great hometown let's think the city is doing better and better and better but parts it or not and so we do make a special effort in those parts of that city now there is a sense that lending nationally is slowed down I'm not getting that from your bank can you give us a sense of what's going on in places that frankly are unbanked and whether there is a revival that can actually move the needle field so one of one important thing these things work when you do it with civic society and government okay they don't work we're at each other so we've seen all around the world when mayors not-for-profits businesses work together you can get people jobs you get them in train to get them employed and it actually works and so but in America America the economy is quite strong and and it's growing at 3% it has been now for a couple of quarters and looks like that way there are no great potholes so let me very well continue and so lending it there is a little bit reduction lending in middle mark we don't exactly know why large corporations of course bonds public markets could clients be too flush I think you know it we do know there's an effect that through tax reform and corporations or any money they need to borrow less it's just hard to figure it ease it out but that really means but if you tow look at employment growth people going back to work it's pretty good alright now last week you told CNBC that it's not it don't call it a trade war call it a trade skirmish previously you have said that there could be at times perhaps a slowdown or at least in the psyche because of the of any sort of trade war how do you feel I told her Traci scores twenty billion dollars of tariffs in and of themselves are a little bit of attack if they all gets paid is attacks in America member people do other things right they they have done supply lines but it's a twenty trillion dollar economy so that that is a negative the real negative isn't that it's confidence consistency if people start reducing investment people start moving the supply chains around that we have seen already moves the markets a little bit and so and the fear that the skirmish may become a war so we we really don't think it's a great way to go bad it could easily offset some of the benefits they've seen from regulatory reform and tax reform I want you talking about right into it for me yeah Marian Lake said recently a fabulous CFO that we haven't really seen genuine regulatory on that would make her happy but there's been so much it's been change of attitude note yeah so I think if you when I travel around CEOs of other industries logistics steel manufacturing pipeline they've all seen it have we seen actual changes in regulation for us not really they have a long list of things they want to do there has been regulatory change for the smaller banks which we totally support to make a a bit easier for them reduce to burn them but it doesn't didn't have any to do for the bigger banks I think I mean in the public's you know we're not asking for throwing out dodd-frank we're simply people simply look at calibrating getting rid of duplication looking at things that hurt the mortgage markets or at this kind of market so you could enhance growth and do it safely no one's looking at you know going back to good old days just recalibrating remember there were 2,000 rules it was like one or two was a lot and they were done in haste and people show his rash and look at cost-benefit you know what makes sense what doesn't all keeping the system safer remember growth stronger economy it also makes the financial system safer now you just mentioned no rate potholes we've got a Fed meeting that's coming up this week they spread that you would get to intend to use the you know like the typical logic that people say means that you can't make as much money and if we can't lend as much so I'm going to say they know potholes the households in good shape people going back to work fight customers say those roads are fine companies of flage tax reform is still a benefit we don't have the extreme leverage we had an OE and and all the lending has been pretty good prime good good lending so it's not been billing but absolutely there's friction out there there's always friction you open up a newspaper any week of any month there's tons of friction and it's mounting brexit QE Turkey Argentina oh and we don't know the full effect of those things so yeah we keep our eye on that but it may not derail the economy you're gonna see separate the two I keep thinking these are all things that should play to your fortress balance sheet strength we have not seen we got European banks that are really really on the run so to speak why isn't JPMorgan making greater presents given the weakness the rest of the world well we do we're in every country and we're steady growing and we do country by country anymore bankers systems people and all the support risk legal credit compliance so our share in Europe is gone up considerably and and we're just doing for adding people and adding branches and you know the basic good old three yards and a cloud of dust okay when I hear stuffs I think you should get a higher price dirties vulnerable for Evans sake you're selling it 12 times next reserves we've been at this game for a long time if for your growth financial with money that's made every single day you open the door why aren't you valued like it's at the blossom tea company that's a question you're gonna have to answer your banks are under still under political regulatory constraints and all that we just went through the crisis I think a lot of people's investors buy always a little worried but you're right worrying very good returns in capital we're growing you know whenever when a cycle his obviously could affect the bank but we will manage right through that cycle just like we did it right through the last one okay when I think about that I think that you must be in there buying stock every day for the company you've chosen a path of buying back stock shrieky but I still many shares you have for the last ten years your share count is not going down enough when will you start getting back to level that where you really are not what you're sopping up the door supply I don't member the exact number but our share counts down like fifteen percent yeah but we're doing six versus ten years ago three five yes yeah well there's some one had been issued over time but since I've been there it's been coming down so but if you want to look at something I would prefer to spend that money not buying back stock doing this so growing our business is far better for the economy right now we don't have a lot of choices but over time I really would prefer not to buy back stock you know companies to do it would make sense I also don't buy this argument that it's bad buying back stock is simply giving it back to you an investor who then redeploys to a better use its redeployment of capital that should be redeployed if a company can't use it but my my druthers always to grow our business which we're now doing okay five hundred branches we're now in all major cities for investment banking middle market banking et cetera we've been growing overseas but think about any bankers and people and stuff like that so that is my prep p2pu invest no building products and services so you're gonna see a lot more than that coming the next twelve months when I think about this and I'm very proud of what you're doing in my home city but I do say okay well Apple to pure capitalist is you know this Jamie we're shareholders we should get that money I there's no real instant payoff here within two three years it's gonna take a long time no it's not true I mean first of all accounting you have to be careful about but when we build a branch okay and we put a million I don't know we want to give the numbers publicly we put capital in the branch but five years later that branch could could be earning contributing to profit a million dollars a year so you know the the timetable of that new cities it's a little more complicated than we open a branch and see we're in but again we already serve 60 million households we want to serve 70 million we want to bring them to all the proxy service we have so there there is a financial payoff it's just it is not overnight but I don't worry about that I just explained to people like you that that's okay the NPV is very good and this could be negative the first year you know maybe breakdowns by the third year and then a plug or depositors of JPMorgan we're not getting the rate that you get on the two year when are you gonna start paying your CD and your depositors more when rates came down the came down like this as race came down to zero banks didn't do it so I'm race started going up they didn't pass it on I think now you just asleep you'll have other options money market funds etc but I think now as rates go up the next 25 the next 25 there's you'll see we called beta you know how much will be passed on it'll go up and up and up well is that going to shrink profitability not I'd be worried not not really because it's we're getting or gaining deposits and the spread that you're maintaining between your cost of funds and your pain would be about the same Jamie you're talking about with the polity just like the politicians did in 1964 you talk about a war on poverty that business seems to be doing a better job you mentioned it in the big settlements from say 2013 when attorney associate attorney general Tony West was kind of after the bank that was you be on the defensive you're playing the offensive and trying to change poverty in this country do you feel that you can do it better in the government no I think I feel you I think government and business have to do it together and it works at a local level we see it in Detroit we see it in New Orleans we see in Chicago we see in LA you see in Philadelphia with great ideas and most of the things we talk about affordable housing skills commercial development abra it's not Democrat a Republican but I think business and government together can do it business you can't do without business and business can't do without government you know government obviously gonna play a role in both in terms of regulation and licensing and stuff like that and while America is the most prosperous nation on the planet we really have to focus on these issues about income inequality infrastructure opioid crisis lack of education Zinna state schools end up in good jobs Jamie yeah you know what you sound like when you say these things you sound like a politician well I'm a patriot okay but if you're a patriot so was General Eisenhower we didn't know where there's a Democrat Republican buddy ran for president cuz he was in a tree won World War two well I'm a bank you're trying I'm not running I just I think it's very important that we have good policy and that we should focus on good policy and all the time and you know as you know I don't mind speaking about good policy analyze it and participate in a way that JPMorgan can so if you're in other areas no other company will do a better job than we can't they're far more knowledgeable but in these kind of areas we can really help communities are good business skills ever really transferable to government though hey I think some are yeah I mean administration management leadership organization but it doesn't mean a CEO will translate to a good politicians you know politicians have a whole set of different skills and you know relating to people and understanding and empathy and so I bet doesn't mean I would never say never that people can or can't some have done it most have say never say never again it brings me back to the dial I would never say never for someone else I would not say a CEO cannot be a good president it's too soon and president Trump was a CEO so you just met mere American teacher in Philadelphia that's something that would not I don't say frowned upon but wouldn't be believable ten years ago when bankers were considered to be antithetical to democracy even because of President Obama what has it changed enough that now you're welcoming communities that were solid Democratic areas that Democrat areas that I think really a poor Bank this it's nice to be welcomed but but just so you know we never stop seeing mayors governors presidents prime ministers Senate even even people who didn't like us because we always said it isn't about they like are we doing a good job or the legitimate complaints we should handle what should we do to make it better for people and so we never stopped doing it but it's nice that's done you know when people do like you okay I want to speak about the country you have been on record saying we know greatest military greatest educational system is to know the best educated the best and the worst okay well we're failing inner-city school kids half them don't graduate like in the poor neighborhoods and a lot of kids aren't getting the skills they need to have a job and so that is a feeling we should be ring ringing an alarm bell about that but we don't and I don't know why well why don't what can you do beyond what you already did what we're doing a tremendous amount in skill so what we doing skills we go to local schools like we now work in the government in New York to Train and my wife did this by the way to train kids to be tellers $36,000 a year twelve thousand medical and pension benefits the kids like the jobs and that's the first rung then they can move up they can become a banker and live in a lot of our branch manager we're tellers and a lot of the regional managers would tell us so we could do it for ourselves but we also help schools locally well it's a high school well as apprenticeships whether it's a Community College with money but it's not just us it's all businesses that need jobs locally they need special training so it really has to be done Logue I should be a national point 1.5 trillion dollars in student loans twenty-three percent default last year supposed to be 40 percent by 2023 I know Marion Lake said look that's not really an issue for a bank but how about for a country it's a huge issue you know we that we've lent the Seoul government lending by the way should and bad lending is bad but it was the mortgages you make or businesses one of the things you have to do is have discipline around capital so you get a return bridges to nowhere are bad schools that don't work are bad Eleni new money people Kappa is a it's a mistake so that student Lenny was a tremendous amount that's been done in the last seven years the folks having a hard time paying it back it's all owned by the government so it's the taxpayers gonna lose whatever hundreds of billions of dollars but it is not good because what we're seeing today is that in other lending so mortgages these kids are having a hard time getting mortgage credit car they're having a hard time getting a credit card so it is affecting the economy it's not like the mortgage crisis it's a trillion three or trillion four so it's not I wouldn't call seminal it's just unfortunate okay let's go back to International for a second you talked about the idea the tariff so far they you know you've got a skirmish but at what point would it be a war and at what point should we be worried that it's really going overboard you know I'm I worry about it and I just don't know you know I mean I think China has been very predictable in retaliation and I think the market kind of expected a tit-for-tat retaliation I think they're kind of expecting NAFTA to to get done it could get worse from here and I just I really don't know what I hope it does I hope that they sit down have rational conversations and we have a both NAFTA which we should do cuz Canada Mexico good neighbors of ours I'm going down to Mexico later this week and with China and I don't know what the conversations are Hynde closed doors anymore so I I really don't know if I urge I think we should try to get well again the president raised very very very good issues we're only talking about the process both did his conclusion I hope their process works I just think it's kind of a riskier way of the president said the problem with banker Jamie Dimon running for president he doesn't have the app tutor the smarts and there's a poor public speaker nervous mess that doesn't sound like cooperation yeah but how did you patch that up I mean I'm sure in the last 10 days you patched this I have not spoken to the president yeah then and and but my okay my I made a mistake I shouldn't yell at Yap like that in which some of you were mentioned on TV but I do want to focus on policy so my view is I let's just focus on policy I shouldn't be taking no shots and having jokes at anyone's expense you think would you put this in the case of say the London whale where you said it was the stupidest thing that moments and the stupidest most embarrassing situation ever been part of it's just right up there with the line and well no no I've said a lot of stupid things in my life but London well we bought some real money things you're saying are common-sense things that we've not heard from bankers we've heard from bankers be on the defensive for a decade you really are saying here's how public-private partnership make not make these neighborhoods better get better since much better schools and we change our country you changes city by city you're trying but again you have a lot of guests on TV you ask most of them what they're doing a lot of these companies are doing stuff just like this they're not just JP Morgan but all these companies are part of the BRT but we actually put out a booklet of the work skills everyone's doing something Minh do a lot of diversity other things are falling behind other countries we've seen I think in total we're slipping I think the bad policy is why we've grown a 2% over the last ten years and not more and that 2% and the American parks you know 20 percent growth in ten years is half what it should have been it's China gonna pass this I doubt it okay we this country is blessed with things that are just way beyond you know schools and your birth the good part the university is land water energy the Atlantic Pacific are the best businesses innovation but we had to sit at series of problems we fix one an uncompetitive tax system for business that was a bad idea we have to fix immigration inner-city schools opioids you fellas a chance to have a job we got to get people back to work skills we should double the Earned Income Tax Credit and one time to have one to point out its reason and we should have a negative income tax of some sort make make jobs that people have because jobs give dignity jobs have better social outcomes but they need to be a living wage so I agree with that concept when I hear from folks and the Earned Income Tax Credit does that and we need to double we should double it and you have to pay more so be it Satya Nadella the CEO of Microsoft you've brought this group together Shantanu Narayan from Adobe bill McDermott from s AP I've never seen anything quite like this frankly and I've been doing this on air and and in print for a while more than a trillion dollars worth of market cap represented by you three gentlemen sitting here and you're announcing the open data initiative in the cloud Satya why is this so important you know the insight that all three of us had based on the work we're doing with many customers you know we talked about coca-cola Unilever Walmart today as customers we're all excited about this open data initiative it's their real insight that led us to do this which is how do we work to put them in control of their own customer data because that's the real currency any brand out there cares deeply about the continuous improvement of their own customer data as understanding and the three of us coming together is going to be central to them feeling in control of their own customer data and the idea being Microsoft with Azure Dynamics you've got a certain set of customer data adobe you've got the experience cloud you've got lots of marketing data different types of data about the customer and how companies are trying to reach out to the customer s ap you've got lots of data - a lot of it having to do with what's going on inside the company that's affecting customers outside as well so what our customer is going to be able to do and maybe bill I'll toss this one to you that they couldn't do before once you figure out this open data thing and they're able to read data across all of your platforms John there isn't a CEO in the world that does not want to have a single view of their customer and they have to connect their demand chain to their supply chain and do so in real time so if you think about the consumer who's social mobile they're geospatial they're always on the fly they're gonna shop different companies in all channels direct-to-consumer wholesale retail and you have to make sure that connection point with that consumer is really intimate so these companies need to be intelligent enterprises because more and more a I and predictive analytics is going to rule and how you engage with that customer but ultimately what you have to do is fulfill so now you're gonna see the demand and the supply chain completely integrated and that data will be shared evenly among our companies so the customer is the major benefactor of the open data initiative we announced today and Shantanu you just announced that Adobe that you're buying Marketo for I think it was four point seven five billion I was trying to ask you about that a few days before you weren't ready to talk to me about it but you can talk about it now how does that move an experienced cloud and what you're trying to build there fit into this broader story well I think all three of us shared this vision of how do we enable enterprises to put customers at the front of the digital journey and Satya and Bill said getting behavioral data getting transactional data and getting customer engagement to be the front and center I think is the most important thing that enterprises can do so that digital is actually a tailwind rather than headwind what Marketo does is add to our offerings in the experience cloud of being able to create this unified profile for all customers and the thing that every customer will tell you today is that they want an engaging experience with whoever they're doing business with whether it's financial services whether it's automotive whether it's retail and Adobe focused a lot more on b2c customers but the same requirements that were true for b2c customers are now true for b2b customers and that's what Marketo provides it's actually a bunch of senior execs built from ASAP that are now you know running Marketo is this a closed party are Amazon Google Salesforce welcome to this initiative how does it work from here now that you guys are finished there very clear but the name itself should sort of tell everything it's an open data initiative you guys in technology name things all kinds of stuff spirit here is not about us it is about really unlocking the data that is our customers data about their own customers but I think what is foundational here is trust in other words ultimately customers will decide and compliance with their own customers trust in them is also going to be very key because if you think about it one of them top considerations for anything around customer data is privacy and regulation around privacy so the most important thing here would be for each vendor to think through how they participate here and ensure that there is more trust in the entirety of the value chain starting with the end consumer to the brand and to us as software vendors or you know tech companies and so I think depending on the business model I think the real challenge is going to be for some who really want to join but their business model is probably not going to allow them to join like you think it's going to be harder for an Amazon or a Google you'll have to ask them but I think overall though what we have all anchored on is if we can create an architecture an incentive system that turns the tide to put customers in control of their own customer data I think the overall economy will be better off now so that's what we are trying to get done John if I may add to that for a second I mean what we have already demonstrated by having a common taxonomy for this customer journey meaning what meaning how you define a customer how you define the demographics how you define the lifetime value how you define their interests we have actually agreed across the companies despite the fact that we have some o laughing products in that space I think demonstrates our commitment to this open data initiative and the fact that you have customers who are excited about building on top of the foundation that we have I think gives us a lot of confidence that this is the right thing for enterprises bill how long you think this is going to take take - to actually get the Box today it's the specs out on this year initiatives so that other companies can join people understand what they have to do with their platforms with their software to be compliant I think the big announcement today represents that Microsoft Adobe NS ap have already begun this journey so in terms of others wanting to join the journey we're happy to share the reference architecture around the ODI initiative I do think the big story here though is trust and I think Satya and Shantanu both said it very well think about trust as the ultimate human currency think about customer experience is the most important priority think about the power of getting the people inside these companies to focus clearly on what's going on outside of these companies this idea of the net present value of a more satisfied and loyal customer plus making the employees more inspired and more loyal is probably the biggest value driver that we can ever come up with let me think about this a 5% improvement in retention is equivalent to a 95 percent improvement in profit for most companies so if we can connect that data to their consumers and give them an unimaginably good experience what is that going to do for revenues and profits for all the companies that we care for big big breakthrough ok we're talking about flexibility we're talking about efficiency and the backdrop here we've got a UN General Assembly meeting we've got something going on with the Deputy Attorney General in Washington perhaps a change happening there we've got a trade war happening between the US and China and that's arguably not the only one going on to what extent is politics having an impact on the demand for product your ability to project what what what demand is going to be out in the marketplace these days or as business just coming on as usual I look at the thing at least that we seem thanks in part to the industry we participate in is digital technology is increasingly becoming pervasive when all parts of the world in all sectors of the economy and so therefore I think it's incumbent on us as the tech industry to ensure that these businesses are creating opportunity in every economy in every society because if you think about it the politics is always going to be associated with what's the well-being of any region any community in any country and as long as technology can play a role in that ultimate success in creating surplus that's equitably distributed I think these short-term bumps will work out but to me that's what it is what both I think we have a real opportunity which we are obviously exercising but we also have a responsibility to make sure the technologies benefits a broad spectrum broad spread and bill sa P a German company technically how does not being a us-based company at this time when there's a lot of trade tension between the US and Europe between the US and a lot of different countries in Asia how is that affecting the way people look at sa P when they're looking to engage with technology and build up their business well obviously we we consider ourselves a truly global software company I think that's very important distinction there is no doubt however that tensions between for example some Asian countries in the United States are pretty high right now and it's probably less so for a German company if you think about where headquarters might be located but in all seriousness I think we're focused in an all tech leaders are responsible around wanting things to work out between countries and technology companies and right now I think we all would benefit greatly from you know an environment where we stay focused on growth and to me open countries are prosperous countries and if you look at the history of the world any time a country has been open it's actually equalled more Commerce more opportunities for everybody so we abide by that principle but there's no doubt in the ASEAN countries in particular I see a newfound strength in our business model shantanu it feels to me like we're entering a new era in cloud where more M&A more partnerships and initiatives like this one how do you look at the market because it seems for a while big companies like you guys were holding off on doing a lot of M&A because things were expensive but your values gone up too and it seems like your pace of M&A has picked up a bit what's your take on on the market for M&A right now well first I think you know all three of us were early adopters of the cloud and recognized the benefits of more rapid innovation that we could do on the cloud of the trust and security that comes from all of this data being in the cloud but you know I think we look at it and say in order to really solve fundamental customer problems putting the onus on integration on customers to work with a number of small companies is just not going to work and that's where I think you know what we're trying to do with ODI is say if leaders in our categories can come together and make it work that's going to be extremely facilitative of companies doing it so I do think you'll see more consolidation as a result of IT professionals not wanting to integrate small systems but to rely on large companies who are innovating at a fast pace you feel the same yeah I mean I think one of the things that we're really doing is bringing down the friction and improving the agility one of the interesting things that you know Bill mentioned was say the ASEAN region if you look at cloud AI and the open data initiative the idea that even a small business in Indonesia can now use sa P Adobe and Microsoft to become that much more fishing is the real opportunity so you're bringing down that barrier to be able to use the latest and greatest technology for every business in every part of the world by really working together it's easy to get started it's easy to take data from one place to the other easy to use AI to reason over it to create new experiences and it's amazing it's in some sense we're commoditizing the technology as an input for driving business ok and on ma you expect to see an increased pace I think MA first of all if you look at all of our R&D budgets I think most people obviously gravitate towards M&A but the organic investments that each of us are making is by far the largest of course we're going to complement that supplement that with M&A where it makes sense but I think the real thing that you're seeing is growth in across all our businesses which is driven by fundamentally organic growth well it's an extraordinary moment having the three of you sitting here talking about this open data initiative Satya Nadella thanks for bringing it all together Shantanu narayan from Adobe bill McDermott frame/s ap thank you skies in New York back to you the market has been by virtue of the fact that we've had this record-setting run the Dow joins the the record-setting move last week the market has been able to ignore almost everything that comes out of Washington so how do you put this into the calculus today for investors I think today's event in itself probably will not will not play a big role I think the biggest risk out of Washington is based between escalation and potential for tariff implementation we've seen some already and we need to see what happens as far as 2019 goes fundamentals have been exceptionally strong when you look at equities you've seen an extremely healthy buyback trade also that continues to support the market along with valuations that are by no means stretched so we think you have a good backdrop we just need basically need to see what happens with tariffs because those are a risk to 2019 numbers market was already going to be down today as a result of these reports that China cancelled the meeting over over trade so we took that leg lower as I said on the Rosenstein headlines but it's it's been remarkable though that the market hasn't really cared much about trade either for more than a few hours or a day I'm when you look at when you look at earnings earnings so far have not really been there hasn't been any material impact in terms of bottom line prints and earnings so far companies are starting to talk more and more about risk around terrorists but like again not no impact on earnings thus far I think that's a risk that we're basically paying close attention to for 2019 and that's where I think you're seeing a market has been fairly fairly resilient so far we you're not working into your models trying to factor in what happens in the midterms we're only six weeks out it's very hard I mean look there is phase one has been implemented on tariffs part of phase two has been implement their discussion about phase three clearly phase three goes through numbers for 2019 we think will come down at least by five bucks in terms of for EPS if possibly up to ten but again it's very hard to distinction between what's reality and what's basically noise yeah well we're gonna get the midterm elections that that's not noise I mean it's the reality of what's gonna happen the outcome is is far unknown at this point Lindsey so how do you factor it all in yeah it's definitely hard to factor in usually you see volatility increase significantly in the third quarter going into midterm elections are usually up 34% we haven't seen that this year looking a lot of the different polls that are out there it seems like the Democrats are gonna take over the house which would just result in more gridlock within Congress which doesn't bode well for growth and the market going forward I don't know what could be negative about gridlock in the in the White House or in in Washington what could they do we've got the tax plan there right yeah you've got the economy that's going you know on all cylinders so why would gridlock be negative you know what I misstated I don't mean that it will be negative what I really mean is that it you're not going to see any growth policies really be pushed through there's just going to be infighting not a lot is going to get done and you're right the market usually typically does well when there is a gridlock in the market I just don't expect increase amounts of fabulous copy there is the same gridlock is good right yeah right and and I and I think that the way that Congress is is positioned now and the way that it's anticipated the election will come out which is the house with the Democrats and the Senate with the Republicans that could change but even if that happens we've got the girl policies in effect we've got regulations that have been cut back we've got tax plan going forward so I don't see what the issue is with that I think gridlock would be fine in terms of what happens with Rosen Stein going forward I don't really see the issues there either to me maybe this is the smoking gun that allows Trump to go after Jeff Sessions and say he worked for you you should have known this you should have kept him in check even then though I think it's a momentary sell in the market but the market keeps going I'm with you I'm more concerned about inflation we're seeing used-car prices move up while oil is not part of the core still the impact of higher energy prices feeds into everything the feedstock so that's my biggest concern so the market seems to be taking a three point ten ten year roughly three point window in stride de Bravo your year-end targets 3000 we're not all that far away from that level as we speak at what point do you start to get a little more bullish is there a chase for a performance into into year-end do you take some comfort that these high-growth sectors which have fueled much of this rally have taken what appears to be a little bit of a backseat these value stocks that should be going up in in what is a very strong economy are finally even with tariffs industrial stocks are performing so well so we've had this price target out for now almost a year and we've had to defend it on many different occasions earlier this year where there was a lot of volatility market continues to be quite resilient I think actually the market probably would have been above 3000 already if it wasn't for trade and trade escalation and an old Terra discussion so for us again we're really looking at 2019 right now if you look at consensus it's implying about 10% growth we think 11 percent is something that's achievable but again that's very much so contingent upon what happens with tariffs if we think that thing things start to converge you get some form of resolution I would say the market probably can move a lockstep with earnings for next year maybe five to ten percent but if there is getting implemented then I think we need to perhaps take a pause taras bring the inflation and Steve's correct to identify that I think what you're seeing right now in the US ten years is that you're gonna see a move towards three and a quarter percent I also think when you look at enter right now I think the street is under invested as it relates to energy oil prices you've got Brent above $80 right now the trend for Brent's crude oil for the remainder of the year is gonna be higher and higher know myself personally I'm adding to my energy exposure I think the trend is sent there but I think there's a little bit for everyone on a day like today so yes you have some of the value names you you close the gap between growth and value over the last couple of weeks and if you look at the market equal weight versus cap-weighted okay equal weight is slightly outperforming but on a day like today there's a little bit for everyone so you seen technology names come back a little bit today they're outperforming some of these value oriented Intex still on pace for its worst month since its March it is but but but the question is do you exhaust the the move that we've seen without tech coming back it's happened before listen it's happened before again so you might have in July and August borrowed a little bit from September I don't think that changes the overall trend for technology itself Friday you get this communication services sector so talking to a lot of hedge fund managers this weekend they're gonna lose Google they're going to lose Facebook they're gonna lose TripAdvisor they're gonna Bava is gonna go into the consumer discretionary now much much further investment how much further Josh can the market go up from here without tech joining joining even though we've proved that it's not necessary this this quarter healthcare is up almost 12% and industrials were up 11% and we made new record highs in the Dow last week we made a new record high in the SP on several occasions so you actually proved it already that you can have the best leading sector on a three-year basis take a pause and other sectors provided the earnings backdrop is strong and the market itself is stable can take the lead and can push the index to new high look listen retailers at multi-year highs telling them all-time highs who would have thought that was possible going back to as recently as December January so yeah it would be great if Amazon wasn't nine percent off a tie and Netflix was making new high every day and Apple was making new high-end toy do you expect a rebound I'm making the point that it's okay if it's not personally I think the fattest pitch in the entire stock market right now is alphabet technically the setup here I think if you get this thing probably 20 25 points higher where really nobody is down in this stock significantly outperforming Facebook in the midst of this large cap tech drawdown alphabet is the name but but put that one idea aside the bigger picture idea and I think this was alluded to earlier actually gridlock will be phenomenal the American public told the Gallup poll recently that they prefer it including Republicans they want to check on this president at this point even if they're Republicans is number one number two if you actually look going back to 1950 the stock market does the the third best of any outcome when you have a Republican in the White House and one house of Congress controlled by Democrats it's not the best possible scenario but it's the third no that's not negative but that's why we ask the questions to our experts about the political calculus if Rosenstein is actually fired and what the outcome could be if that could tilt the outcome at all America schools or dramatic midterms that's a really good question if you were if you would ask me in December what's the biggest risk to the stock market I would not have said recession or earnings or any of the oil or any of that stuff the dollar I would have said an exogenous shock caused by something in Washington where we get a Saturday night Saturday night mass massacre and everyone loses confidence in the US stock market at once I no longer believe that's the case because I think the market now expects some version of impeachment proceedings this fall not saying it'll be successful I'm not saying Trump is in trouble I'm just saying the market now expects this this is the base case that we are going to have a vicious political no maybe maybe Jimmy the exogenous shock is the Democrats taking both houses and I mean at some point when you got wood shop tomorrow I think that would be the shock you're only six weeks out let's not forget it's not that way where all of those questions are gonna be asked why if because it's very unexpected I mean and I'm sure you do your polls as well everybody's expecting a democratic house and a Senate Republican or choosing a Republican Senate look if they go through impeachment in that in that scenario you've got to stop in the Senate if it's Republican it goes nowhere if it's Democratic then you actually have to think about the investing Asians go on though let me you're a because the big question here is what has the market priced in at least that's the big question to me we've got a divergence here that's telling us the market is pricing in a lot of bad things what's that divergence you've got killer earnings all right the last two quarters earnings have just blown the cover off the ball and expectations still go higher you mentioned that in terms of 5 to 10 percent growth in this late in the cycle 5 to 10 percent growth year over year is incredible but the multiple has contracted to turns since the beginning of the year that is the markets way of saying don't know if it's tariffs don't know if it's impeachment don't know if it's in place you'd think the marketing that all in there and what the other than the two you think the market has priced in the worst of tariffs yes no you think the market has wait let me get the punchline here ok whatever whether it's priced in all the tariffs are not true ok it's priced in bad news that's why we're - turns on no what has he you're never gonna finish dude the Mobile's contracted because rates have risen slowly and shortly but they had they were to yield on the - excuse me the yield on a two-year the older than ten-year they've risen and as a result yeah you should not have an expanding stock market multiple you have great earnings tempered by the fact that money is not as cheap as it was okay so it's not like a rocket science wait a second it's never one thing so don't say that it's just mostly one thing and don't no it's not it's not and by the way we've got earnings season coming up there's been no pre announcements okay looks like that's basically for you now feel free to make your point but let's make them go hearing right then I'll just summarize look you're setting up for another good earnings season third in a row what's gonna meet are we gonna have expectations on earnings continue to rise and multiples contract I don't think so it's more likely at this stage in the cycle that the multiple starts to pick up but we have that much of a disagreement on the desk as to whether tariffs are fully priced they're not president there's at this point last week I was talking about that there was going to be a trilateral agreement between Mexico Canada and the US and that's why the market was rally we we have not got that so and I think as it relates Oh what's going on with the Chinese further implementation of these tariffs raises prices that's a problem for the US consumer that's a problem for US corporations and it is an inflationary impact but the market doesn't draw economy clearly the market doesn't think that it's going to be that punitive to earning 100 this point absolutely I said that I disagree I think what is priced in right now is a favorable outcome at some point can I can I just come back to his point pre-announcement see I'll disagree facts had put out piece on it last week saying that it's been the highest percentage of negative pre announcements since the first quarter of 2016 but you can't really have it both ways you can't say that so much is priced into the market yet strong earnings which everybody's been talking about and uniformly agrees are going to occur this quarter isn't priced in well that's the point expectations are extremely high going into the third quarter because we've had such great numbers out of the first and second quarter your the expectations are high going into the third quarter you just saw the CEO Business Roundtable confidence come out today CEOs are worried about tariffs you heard UPS talk about it they said it only impacted about 10 percent of their revenues so far micron mentioned it we're gonna hear this word on conference calls significantly third quarter what if you need to wait to the conference right right Macy's Office Depot I could go down the list argue all thread Smith and I grew that and so I think what you after pears look CEOs who do one of two things they're not gonna say hey Trump's doing the wrong thing right they'll couch it and say hey we're more cautious going forward because of the cost inputs going higher to your point we had the last quarter in the quarter before that great earnings without the tariff issues and what the markets do after the quarterly announcements what they did what Derek you did have a point and then I want to profit are fishes in there last time and also you got to use the numbers here two hundred billion ten percent tariffs twenty billion dollars a year on the sp500 I don't think it's going to show up I understand the concern about inflation so I'm not saying it's not there I'm saying it's small and that's in the market that's what I'm saying and as we ask the question whether the worst of the tariffs where them are here but you suggested yes I did I'm standing by it you're halfway through what the maximum possible tariffs now if we don't play if you get 25% on another you throw in another 267 okay you're you're correct that I'm assuming rationality you've got the rest against you now huh you got the referee on you too if we continue to play a game of I'll see your 200 billion and raise you another 50 billion that's gonna be a problem for the market in 2004 tariffs on Rothko no I think I think terrorists are partially priced in I don't think entirely I think if you do go into phase 3 I mean first of all I think if they implement 25% on phase 2 that in itself will likely bring down some of the numbers in 19 which I don't think it's fully priced in I do think partially it is I think multiple is a function of rates at fully agree I do think that trade however is also something that's limiting the multiple from re-rating maybe not by 2x but regrading by 1x gridlock just another thing I just want to mention real quickly I do fully agree gridlock I think is a positive because out of DC last year you had a pro-growth agenda this year you have an anti growth so you get a gridlock I think the market likes that can I ask you this market has been driven by buybacks if the CEOs get a whiff of a slowdown in growth do you think you'll continue to see the aggressive nature of buybacks that we've seen the last couple nor you need to see it even more so if that's what they need to grow earnings they would double down on by that there's no indication that they are seeing this slow we had Jamie Dimon the the JPMorgan CEO on just a few moments ago with our own Jim Cramer it's a CNBC exclusive interview in Philadelphia here's what he said about the state of the economy America the economy is quite strong and and it's growing at 3% it has been now for a couple of quarters and looks like that way there are no great potholes so let me very well continue no indication from Jamie Dimon sees a whole lot of stuff in the things that he looks at that we're gonna get that slowdown that you say well if we get a slowdown companies maybe gonna buy a little less of their stock back now I think look at the big risk is tariffs and impact on margins I think when you look at the economy you're basically looking employment which is a very strong job at strong you're finally seeing some wage inflation which is basically helping the consumers and actually there's one thing that if you look at q2 Ghana's most companies we're actually talking about the consumer strength right so again I don't think that the earnings picture is I don't think it's that clear that you know expect expectations have risen but I don't think they're extreme teres is a negative but on the other side I think you have an economist what's the house view on what's the house view on the ten-year and Quentin and just just the the premium and how small it's gotten and and what do you think really would impact stock prices if it's not you know if we're not really gonna worry about the curve then what would we worry about I'm glad you asked that question because my next question to you was gonna be we've gone you know 22 minutes here and we've talked about all of these potential risk inflation I get it but the the word the Fed hasn't even been mentioned yet they're gonna be front and center this week how much of a wild card is that and it plays right into Josh's question yes so look that the Fed hiking rates I think is a gradual negative it is eating into margin slowly but we estimated margins for instance when you look at earnings margins won't get impacted entirely until Fed hikes for another at least fifty two hundred bits if you look at interest expense and the debt levels I think the multiple is a function of yield so again if you'll move higher say north of three and a half three and three-quarters I do think this becomes an issue but let's first get there again our house view I would say probably is more in line with between a quarter to three and a half now pension funds US pension funds corporate pension funds government pension funds are just insatiable buyers of 10-year Treasury they're getting way heavy into private equity and so to counter that lack of liquidity it's a barbell on the other side they're going nuts on on Troy which i think is the reason for this narrowing spread and not economic concern you would you agree with that I would agree yes I've had many many PM's basically tell me asset allocators tell me 10-year yield at 3 percent that's a buying opportunity for like the whole world yes huge pulls up when you look at what's happening abroad with Germany Japan it's so where do you think so the question that I ask people that nobody knows the answer to because we're in sea rescue for environment is where do you see restrictive policy now it used to be over five percent clearly it's not could be there anymore where is it so I would say probably three and three quarters four percent anything above that I think becomes restrictive unless we have new reasons coming out suggesting growth will accelerate but you don't have your your you know your sector waiting czar what would you recommend right now is the top three places to be in the market we've been pushing last several months a barbell portfolio I'm sort of using the same same same term here basically we continue to like tech because we do think that the late cycle you won't have exposure to growth people pay a premium for gross car city but at the same time given how extreme this location levels have become in the market we're saying don't be naked on the value side have value anchors we like financials with like industrials we like energy but you're I guess the reason I asked you the question is by virtue of the fact that you have those sectors tech financials industrials energy growth cyclical you can't be worried about all that much no we're not we think that the business suckled economic cycle is intact not just in the US but globally again I keep mentioning tariffs and trade escalation is my biggest worry for 2019 in terms of do we move sideways or do we potentially move higher by 10% when you look at the emerging markets relative to where they are versus the US is that a great opportunity on a longer-term basis we do think so we do think that emerging markets increasingly becoming a very attractive opportunity risk reward is quite attractive positioning is very negative sentiment is very negative I'm with you on this China I mean it's basically in a recession territory when you look at the gap between US and China we think look there's there's a lot of interesting buying opportunities it's very difficult coming up with the catalysts and timing the catalyst but again six-month a 12-month view we think am definitely I think the risk though on that trade well you get more reward but so much more has to go right for you to get the reward now I disagree we actually did a lot of work on this recently we had some questions from clients it turns out when you buy emerging markets as Anand as a sector as an asset class after 20% declines the CNBC exclusive hey again Jeff thank you so much Karl yep we're here with Jamie Dimon Jamie this is quite a commitment to an area that frankly has gone from bank to unbanked city just pulled out over the course the last five years 15 million dollars and network 330 banks have closed in the last 10 years why why not yeah well you know with regulatory reform and tax form where you now says 20 billion dollar thing going to many cities obviously Philadelphia is the seventh largest mark in the United States that's not including their biggest suburb called New York and you know we and we like to be part of a community we're already here in investment banking commercial banking and private banking retail is a gap so we're gonna open 50 branches 20 percent will be in LMI neighborhoods neighborhoods like this and when we come in we bring the full force of JP Morgan which is philanthropy dollars but to really help people like entrepreneur color funds affordable housing units and and we enjoy it it's good for the company and over time and we're we invest the long-run we never pulling it out of something talk about the multiplier effect and when you open a branch people think you know what we don't need branches anymore everything's digital yeah but brick the more works it's amazing so I think people aren't thinking clearly a million people visited branches every day the type of branch is gonna change the size that branch contained they're getting smaller but more advice so there's a mortgage loan office in there there's a small business loan officer there's a financial adviser but your financial affairs so that'll change but a million people even even the average millennial visits something like three times a quarter so to me the question of brands no more forget they'll change but you still need to serve your client the way they want to be served not the way I want to serve them as you know we've rolled out all these new products too right like like finding the online-only back well maybe mention this because a lot of people feel that 10 years ago one of the problems was the education the borrower the boy or did not know enough about what to do you said to be someone in there literally to help and to teach yeah well that make a difference versus say 10 years ago yeah I've told the people here when you go to these LMI neighborhoods try something special but we were gonna roll a lot of financial education tools we have you invest we're gonna roll out a self advised group and we haven't decided price yet so that you could advise and think about we already put on the screen you can get your FICO score and we're gonna teach you ways and you what you can improve your FICO so that you can reduce cost a bar and stuff like that we have to do a better job not just us but the America educating people in financial matters from rainy day funds to handle you know retirement accounting and so we're making especially have to do that now it's only have things coming out that hopefully our customers will enjoy let's talk about the power of business versus the power of government government legendarily got big settlements from different banks 13 billion dollars from you yeah Keith Blood says that you pay a total of 44 billion did that money go into the community and did that was that the way to get things done versus the targeted way you're doing well this actually ups community I mean that some of those funds we don't actually know how they dispersed and I think one day someone should look at that and you know I cried the past we've moved forward about how we do it for you but this is how you build a community small business lending affordable housing branches that advise people and we know that that works cities know this City Philadelphia your great hometown let's think the city is doing better and better and better but parts it or not and so we do make a special effort in those parts of that city now there is a sense that lending nationally is slowed down I'm not getting that from your bank can you give us a sense of what's going on in places that frankly are unbanked and whether there is a revival that can actually move the needle field so one of one important thing these things work when you do it with civic society and government okay they don't work we're at each other so we've seen all around the world when mayors not-for-profits businesses work together you can get people jobs you get them in train to get them employed and it actually works and so but in America America the economy is quite strong and and it's growing at 3% it has been now for a couple of quarters and it looks like that way there are no great potholes so let me very well continue and so lending it there is a little bit reduction lending in middle mark we don't exactly know why large corporations of course bonds public markets could clients be to flush I think you know it we do know there's an effect that through tax reform and corporations or any money they need to borrow less it's just hard to figure it ease it out but that really means but if you tow look at employment growth people going back to work it's pretty good all right now last week you told CNBC that it's not it don't call it a trade war I call it a trade skirmish previously you have said that there could be at times perhaps a slowdown or at least in the psyche because of the of any sort of trade war how do you feel I told her Traci scores twenty billion dollars of tariffs in and of themselves are a little bit of attack if that all gets paid is a tax in American people do other things they they have the other supply lines but the 20 trillion dollar economy so that that is a negative the real negative isn't that it's confidence consistency if people start reducing investment people start moving the supply chains around that we have seen already moves the markets a little bit and so and the fear that the skirmish may become a war so we really don't think it's a great way to go bad it could easily have said some of the benefits they've seen from regulatory reform and tax reform I want you talking about regulate for me yeah Marian Lake said recently a fabulous CFO that we haven't really seen genuine regulatory that would make her happy but there's been so much it's been change of attitude no yeah so I think if you when I travel around CEOs of other industries logistics steel manufacturing pipeline they've all seen it have we seen actual changes in regulation for us not really they have a long list of things they want to do there has been regulatory change for the smaller banks which we totally support to make a little bit easier for them reduced to burn them but it doesn't didn't have any to do for the bigger banks I think I mean in the public's you know we're not asking for throwing out dodd-frank we're simply people so we look at calibrating getting rid of duplication looking at things that hurt the mortgage markets or at this kind of market so you could enhance growth and do it safely no one's looking at you know going back to good old days just recalibrating remember there were 2,000 rules it wasn't like one or two was a lot and they were done in haste and people show he's rash and look at cost-benefit you know what makes sense what doesn't all keeping the system safer I remember growth a stronger economy it also makes the financial system safer now you just mentioned no rate potholes we've got a Fed meeting that's coming up this week they spread that you would get to intend to use the you know like the typical logic that people say means that you can't make as much money and if we can't lend as much so I'm going to say the no potholes the households in good shape people going back to work fight customers say hydro stores are fine companies of flage tax reform is still a benefit we don't have the extreme leverage we hadn't Oh 8 and and all the lending has been pretty good prime good good lending so it's not been billing but absolutely there's friction out there there's always friction you open up a newspaper any week of any month there's tons of friction and it's mounting brexit we Turkey Argentina oh and we don't know the full effect of those things so yeah we keep our eye on that but it may not derail the economy you're gonna see separate the two I keep thinking these are all things that should play to your fortress balance sheet strength we've not seen we got European banks that are really really on the run so to speak why doesn't JP Morgan make you greater presence given the weakness the rest of the world well we do we're in every country and we're steady growing and we do country by country anymore bankers systems people and all the support risk legal credit compliance so our share in Europe has gone up considerably and and we're just doing for adding people and adding branches and you know the basic good old three yards of the cloud of dust okay when I hear three us I think you should get a higher price dirties vulnerable for Evans sake you're selling it twelve times an extra surgeries we've been at this game for a long time if we're your growth financial with money that's made every single day you open the door why aren't you valued like it's a blossom tea company that's a question you're gonna have to answer then your banks are under still under political regulatory constraints and all that we just went through the crisis I think a lot of people's investors buy always a little worried but you're right worrying very good returns in capital we're growing you know whenever when a cycle hit obviously it could affect the bank but we will manage right through that cycle just like we did it right through the last one okay when I think about that I think that you must be in there buying stock every day for the company you've chosen a path of buying back stock shrinky but I still can't believe how many shares you have for the last ten years your share count is not going down enough when will you start getting back to a level that where you really are not where you're sopping up the door supply I don't remember the exact number but I our share comes down like 15 percent yeah but we're doing six versus ten years ago two three five and yes yeah well there's some have been issued over time but since I've been there it's been coming down so but if you want to look at something I would prefer to spend that money not buying back stock doing this so growing our business is far better for the economy right now we don't have a lot of choices but over time I really would prefer not to buy back stock you know the companies to do it would make sense I also don't buy this argument that it's bad buying back stock is simply giving it back to you an investor who then redeploys to a better use its redeployment of capital that should be redeployed if a company can't use it but mine my druthers always to grow our business which we're now doing okay I've heard of branches we're now in all major cities for investment banking middle market banking etc we've been growing overseas but think about any bankers and people and stuff like that so that is my preppie 2p you invest now building products and services so you're gonna see a lot more for that coming the next 12 months when I think about this and I'm very proud of what you're doing in my home city but I do say ok well Apple of pure capitalist is you know Jamie we're shareholders we should get that money I there's no real instant payoff here within 2 3 years it's gonna take a long time no it's not true I mean first of all accounting you have to be careful about but when we build a branch ok and we put a mean I don't know we want to give the numbers publicly we put capital in the branch but five years later that branch could could be earning contributing to profit a million dollars a year so you know the the timetable of that new cities it's a little more complicated than we open a branch the city we're in but again we already serve 60 million households we want to serve 70 million we want to bring them to all the proxy service we have so there there is a financial payoff it just it is not overnight but I don't worry about that I just explained to people like you that that's okay the NPV is very good and it's gonna be negative the first year you know maybe breakdowns by the third year and then a plus a plus for depositors at JPMorgan we're not getting the rate that when are you gonna start paying your CD and your depositors more when rates came down the but it came down like this as race came down to zero banks didn't do it so race started going up they didn't pass it on I think now you asleep elope other options money market funds etc but I think now as rates go up the next 25 the next 25 there's you'll see what we called beta you know how much will be passed on it'll go up and up and up well is that going to shrink profitability not I'd be worried not not really because it's we're getting or gaining deposits and the spread that you're maintaining between your cost of funds and your pain would be about the same Jamie you're talking about with the polity just like the politicians did in 1964 you talk about a war on poverty that business seems to be doing a better job you mentioned it in the big settlements from say 2013 when attorney associate attorney general Tony West was kind of after the bank that was you be on the defensive you're playing the offensive and trying to change poverty in this country do you you than you can do it better in the government no I think I feel you I think government and business have to do it together and it works at a local level we see it in Detroit we see it in New Orleans we see in Chicago we see in LA you see in Philadelphia with great ideas and most of the things you talk about affordable housing skills commercial development audre it's not Democrat a Republican but I think business and government together can do it business you can't do without business and business can't do without government you know government obviously is gonna play a role in both the terms of regulation and licensing and stuff like that and while America is the most prosperous nation the planet we really have to focus on these issues about income inequality infrastructure opioid crisis lack of education in the state schools end up in good jobs Jamie yeah you know what you sound like when you say these things you sound like a politician I'm a patriot okay but if you're a patriot so is generalizing now we didn't know whether there's a Democrat Republican buddy ran for president he was a patreon world war two well I'm a banker guy I'm not running I just I think it's very important that we have good policy and that we should focus on good policy and all the time and you know as you know I don't mind speaking about good policy analyze it and participate in a way that JP Morgan can so if you're in other areas or other comes will do a better job than we camps they're far more knowledgeable but in these kind of areas we can really help communities are good business skills ever really transferable to government though I think some are yeah I mean Administration management leadership organization but it doesn't mean a CEO will translate to a good politician you know politicians have a whole set of different skills and you know relating to people and understanding empathy and so but it doesn't mean I would never say never that people can or can't some have done it most have they don't say never say never again it brings me back to the dial I would never say never for someone else I would not say a CEO cannot be a good president do you think it's too soon and the president Trump was a CEO so you just met mere American teachers in Philadelphia that's something that would not I don't say frowned upon but wouldn't be believable ten years ago when bankers were it considered to be antithetical to democracy even because of President Obama what has it changed enough that now you're welcoming communities that were solid Democratic areas that Democrat areas that I think really abhor bankers it's nice to be welcomed but just so you know we never stopped seeing mayor's governor's presidents prime ministers Senate even even people who didn't like us because we always said it isn't about they like it are we doing a good job or the legitimate complaints we should handle what should we do to make it better for people and so we never stopped doing it but it's nice that's done you know when people do like yeah okay I want to speak about the country you have been on record saying we know greatest military greatest educational system is there no the best educator the best and the worst okay well we're failing inner-city school kids half them don't graduate like in the poor neighborhoods and a lot of kids aren't getting the skills they need to have a job and so that is a feeling we should be ring ringing an alarm bell about that but we don't and I don't know why well I don't what can you do beyond what you already did what we're doing a tremendous amount in skill so what we do in skills we go to local schools like we now working a Guttman in New York the Train is my wife did this by the way to Train kids to be tellers $36,000 a year twelve thousand medical and pension benefits the kids like the jobs and that's the first rung then they can move up they can become a banker and live in a lot of our branch manager we're tellers and a lot of the regional managers would tell us so we could do it for ourselves but we also help schools locally well it's a high school well it's apprenticeships whether it's a community college with money but it's not just us it's all businesses need jobs locally they need special training so it really has to be done Logue I should be a national boy 1.5 trillion dollars in student loans 23% default list you're supposed to be 40 percent by 2023 I know Marian Lake said look that's not really an issue for a bank but how about for a country it's a huge issue you know we we've lent this old government lending by the way should and bad lending is bad but it was the mortgages you make or businesses one of the things you have to do is have discipline around capital so you get a return bridges to nowhere are bad schools that don't work are bad lending in money people camp is a it's a mistake so that student Lenny was a tremendous amount that's been done in the last seven years the folks having a hard time paying it back it's all owned by the government so it's the taxpayers gonna lose whatever hundreds of billions of dollars but it is not good because what we're seeing today is that in other lending so mortgages these kids are having a hard time getting mortgage credit card having a hard time getting a credit card is affecting the economy it's not like the mortgage crisis it's a trillion three or trillion four so it's not I wouldn't cause damage it's just fun for it's really highly unfortunate okay let's go back to international for a second you talked about the idea the tariffs so far they you know you've got a skirmish but at what point would it be a war and at what point should we be worried that it's really going overboard you know I'm I worry about it and I just don't know you know I mean I think China has been very predictable in retaliation and I think the market kind of expected a tit-for-tat retaliation I think they're kind of expecting NAFTA to get done it could get worse from here and I just I really don't know what I hope it does I hope that they sit down and rational conversations and we have a both NAFTA which we should do as Canada Mexico good neighbors of ours I'm going down to Mexico later this week and with China and I don't know what the conversations are behind closed doors anymore so I I really don't know if I urge I think we should try to get well again the president raised very very very good issues we're only talking about the process both did his conclusion I hope their process works I just think it's kind of a riskier way of the president said the problem with banker Jamie Dimon running for president she doesn't have the app tutor the smarts and there's a poor public speaker nervous mess that doesn't sound like cooperation yeah but how did you patch that up I mean I'm sure in the last 10 days you patched this I have not spoken to the president yeah then and and but my okay my I made a mistake I shouldn't yell at Yap like that in which some of you were mentioned on TV but I do want to focus on policy so my view is I let's just focus on policy I shouldn't be taking you know shots and having jokes at anyone's expense would you think would you put this in the case of say the London whale where you said it was the stupidest thing that moments and the stupidest most embarrassing situation ever been part of it's just right up there with the line and well no no I've said a lot of stupid things in my life but London well we bought some real money things you're saying are common-sense things that we've not heard from bankers we've heard from bankers be on the defensive for a decade you really are saying here's how public-private partnership make nut make these neighborhoods better get better since much better schools and we change our country you change the city by six you're trying but again you have a lot of guests on TV you ask most of them what they're doing a lot of these companies are doing stuff just like this they're not just JP Morgan but all these companies are part of the BRT that we actually put out a booklet of the work skills everyone's doing something Minh do a lot of diversity other things are falling behind other countries we've seen I think in total we're slipping I think the bad policy is why we've grown to 2% over the last 10 years and not more and that 2% and the American parks you know 20 percent growth in ten years is half what it should have been it's China gonna pass this I doubt it okay we this country is blessed with things that are just way beyond you know schools and you revert the good part the university is land water energy the land of the Pacific are the best businesses innovation but we had to sit at series of problems we fix one an uncompetitive tax system for business that was a bad idea we have to fix immigration inner-city schools opioids we have the ability have a job we've got to get people back to work skills we should double the Earned Income Tax Credit and what is that one time to have one to point out its reason and we should have a negative income tax of some sort make make jobs that people have because jobs give dignity jobs have better social outcomes but they need to be a living wage so I agree with that concept when I hear from folks and the Earned Income Tax Credit does that and we need to double we should double it and you have to pay more so be it Satya Nadella the CEO of Microsoft you've brought this group together Shantanu Narayan from Adobe bill McDermott from s AP I've never seen anything quite like this frankly and I've been doing this on air and and in print for a while more than a trillion dollars worth of market cap represented by you three gentlemen sitting here and you're announcing the open data initiative in the cloud Satya why is this so important you know the insight that all three of us had based on the work we're doing with many customers you know we talked about coca-cola Unilever Walmart today as customers we're all excited about this open data initiative it's their real insight that led us to do this which is how do we work to put them in control of their own customer data because that's the currency any brand out there cares deeply about the continuous improvement of their own customer data as understanding and the three of us coming together is going to be central to them feeling in control of their own customer data and the idea being Microsoft with Azure Dynamics you've got a certain set of customer data Adobe you've got the experienced cloud you've got lots of marketing data different types of data about the customer and how companies are trying to reach out to the customer s ap you've got lots of data to a lot of it having to do with what's going on inside the company that's affecting customers outside as well so what our customer is going to be able to do and maybe Bill I'll toss this one to you that they couldn't do before once you figure out this open data thing and they're able to read data across all of your platforms John there isn't a CEO in the world that does not want to have a single view of their customer and they have to connect their demand chain to their supply chain and do so in real-time so if you think about the consumer who's social mobile they're geospatial they're always on the fly they're going to shop different companies in all channels direct-to-consumer wholesale retail and you have to make sure that connection point with that consumer is really intimate so these companies need to be intelligent enterprises because more and more a I and predictive analytics is going to rule and how you engage with that customer but ultimately what you have to do is fulfill so now you're gonna see the demand and the supply chain completely integrated and that data will be shared evenly among our companies so the customer is the major benefactor of the open data initiative we announced today and Shantanu you just announced that Adobe that you're buying Marketo for I think it was four point seven five billion I'll try to ask you about that a few days before you weren't ready to talk to me about it but you can talk about it now how does that move an experienced cloud and what you're trying to build there fit into this broader story well I think all three of us shared this vision of how do we enable enterprises to customers at the front of the digital journey and Satya and bill said getting behavioral data getting transactional data and getting customer engagement to be the front and center I think is the most important thing that enterprises can do so that digital is actually a tailwind rather than headwind what Marketo does is add to our offerings in the experience cloud of being able to create this unified profile for all customers and the thing that every customer will tell you today is that they want an engaging experience with whoever they're doing business with whether it's financial services whether it's automotive whether it's retail and Adobe focused a lot more on b2c customers but the same requirements that were true for b2c customers are now true for b2b customers and that's what Marketo provides it's actually a bunch of senior execs built ASAP that are now you know running market or is this a closed party are Amazon Google Salesforce welcome to this initiative how does it work from here now that you guys have it very clear but the name itself should sort of tell everything it's an open data initiative you guys some technology name things all kinds of stuff init here is not about us it is about really unlocking the data that is our customers data about their own customers but I think what is foundational here is trust in other words ultimately customers will decide and compliance with their own customers trust in them is also going to be very key because if you think about it one of them top considerations for anything around customer data is privacy and regulation around privacy so the most important thing here would be for each vendor to think through how they participate here and ensure that there is more trust in the entirety of the value chain starting with the end consumer to the brand and to us as software vendors or you know tech companies and so I think depending on the business models I think the real challenge is to be for some who really want to join but their business model is probably not going to allow them to join like you think it's gonna be harder for an Amazon or a Google in you you have to ask them but I think overall though what we have all anchored on is if we can create an architecture an incentive system that turns the tide to put customers in control of their own customer data I think the overall economy will be better off now so that's what we are trying to get done if I may add to that for a second I mean what we have already demonstrated by having a common taxonomy for this customer journey meaning what meaning how you define a customer how you define the demographics how you define the lifetime value how you define their interests we have actually agreed across the companies despite the fact that we have some overlapping products in that space I think demonstrates our commitment to this open data initiative and the fact that you have customers who are excited about building on top of the foundation that we have I think gives us a lot of confidence that this is the right thing for enterprises bill how long do you think this is gonna take take - to actually get the touch today it's the specs out on this year initiatives are that other companies can join people understand what they have to do with their platforms with their software to be compliant I think the big announcement today represents that Microsoft Adobe NS ap have already begun this journey so in terms of others wanting to join the journey we're happy to share the reference architecture around the ODI initiative I do think the big story here though is trust and I think Satya and Shantanu both said it very well think about Trust is the ultimate human currency think about customer experience is the most important priority think about the power of getting the people inside these companies to focus clearly on what's going on outside of these companies this idea of the net present value of a more satisfied and loyal customer plus making the employees more inspired and more loyal is probably the biggest value driver that we can ever come up with let me think about this a 5% improvement in retention is equivalent to a 95 percent improvement in profit for most companies so if we can connect that data to their consumers and give them an unimaginably good experience what is that going to do for revenues and profits for all the companies that we care for it's big big breakthrough ok we're talking about flexibility we're talking about efficiency and the backdrop here we've got a UN General Assembly meeting we've got something going on with the Deputy Attorney General in Washington perhaps a change happening there we've got a trade war happening between the US and China and that's arguably not the only one going on to what extent is politics having an impact on the demand for product your ability to project what what what demand is going to be out in the marketplace these days or as business just coming on as usual I mean the thing at least that we see thanks in part to the industry we participate in is digital technology is increasingly becoming pervasive when all parts of the world in all sectors of the economy and so therefore I think it's incumbent on us as the tech industry to ensure that these businesses are creating opportunity in every economy in every society because if you think about it the politics is always going to be associated with what's the well-being of any region any community in any country and as long as technology can play a role in that ultimate success in creating surplus that's equitably distributed I think these short-term bumps will work out but to me that's what it is what both I think we have a real opportunity which we are obviously exercising but we also have a responsibility to make sure the technologies benefits a broad spectrum broad spread and bill sa P a German company technically how does not being a us-based company at this time when there's a lot of trade tension between the US and Europe between the US and a lot of different countries in Asia how is that affecting the way people look at sa P when they're looking to engage with technology and build up their business well obviously we we consider ourselves a truly global software company I think that's very important distinction there is no doubt however that tensions between for example some Asian countries in the United States are pretty high right now and it's probably less so for a German company if you think about where headquarters might be located but in all seriousness I think we're focused in in all tech leaders are responsible around wanting things to work out between countries and technology companies and right now I think we all would benefit greatly from you know an environment where we stay focused on growth and to me open countries are prosperous countries and if you look at the history of the world anytime a country has been open it's actually equalled more Commerce more opportunities for everybody so we abide by that principle but there's no doubt in the ASEAN countries in particular I see a newfound strength in our business model Shantanu it feels to me like we're entering a new era in cloud where more M&A more partnerships and initiatives like this one how do you look at the market because it seems for a while big companies like you guys were holding off on doing a lot of M&A because things were expensive but your values gone up too and it seems like your pace of M&A has picked up a bit what's your take on on the market for M&A right now well first I think you know all three of us were early adopters of the cloud and recognized the benefits of more rapid innovation that we could do on the cloud of the trust and security that comes from all of this data being in the cloud but you know I think we look at it and say in order to really solve fundamental customer problems putting the onus on integration on customers to work with a number of small companies is just not going to work and that's where I think you know what we're trying to do without is say if leaders in our categories can come together and make it work that's going to be extremely facilitative of companies doing it so I do think you'll see more consolidation as a result of IT professionals not wanting to integrate small systems but to rely on large companies who are innovating at a fast pace such an you feel the same yeah I mean I think one of the things that we're really doing is bringing down the friction and improving the agility one of the interesting things that you know Bill mentioned was say the ASEAN region if you look at cloud AI and the open data initiative the idea that even a small business in Indonesia can now use sa P Adobe and Microsoft to become that much more efficient is the real opportunity so you're bringing down that barrier to be able to use the latest and greatest technology for every business in every part of the world by really working together it's easy to get started it's easy to take data from one place to the other easy to use AI to reason over it to create new experiences and it's amazing it's in some sense we are commoditizing the technology as an input for driving business ok and on ma you expect to see an increased pace I think ma first of all if you look at all of our R&D budgets I think most people obviously gravitate towards M&A but the organic investments that each of us are making is by far the largest of course we're going to complement that supplement that with M&A where it makes sense but I think the real thing that you're seeing is growth in across all our businesses which is driven by fundamentally organic growth well it's an extraordinary moment having the three of you sitting here talking about this open data initiative Satya Nadella thanks for bringing it all together Shawn - Narayan from Adobe bill McDermott frame/s ap thank you skies in New York back to you the market has been by virtue of the fact that we've had this record-setting run the Dow joins the the record-setting move last week the market has been able to ignore almost everything that comes out of Washington so how do you put this in the calculus today for investors I think today's event in itself probably will not will not play a big role I think the biggest risk out of Washington is basically trade escalation and potential for tariff implementation we've seen some already and we need to see what happens as far as 2019 goes from the metals have been exceptionally strong when you look at equities you've seen an extremely healthy buyback trade also that continues to support the market along with valuations that are by no means stretched so we think you have a good backdrop we just need basically need to see what happens with tariffs because those are a risk to 2019 numbers market was already going to be down today as a result of these reports that China cancelled the meeting over over trade so we took that leg lower as I said on the Rosenstein headlines but it's it's been remarkable though that the market hasn't really cared much about trade either for more than a few hours or a day I mean when you look at when you look at earnings earnings so far have not really been there hasn't been any material impact in terms of bottom line prints and earnings so far companies are starting to talk more and more about risk around tariffs but like again not no impact on earnings thus far I think that's a risk that we're basically paying close attention to for 2019 and that's where I think you're seeing a market has been fairly fairly resilient so far we you're not working into your models trying to factor in what happens in the midterms we're only six weeks out it's very hard I mean look there is phase one has been implemented on tariffs part of phase two has been implemented discussion about phase three clearly phase three goes through numbers for 2019 we think will come down at least by five bucks in terms of for EPS if possibly up to ten but again it's very hard to distinction between what's reality and what's basically noise yeah well we're gonna get the midterm elections that that's not noise I mean it's the reality of what's gonna happen the outcome is is far unknown at this point Lindsey so how do you factor it all in yeah it's definitely hard to factor in usually you see volatility increase significantly in the third quarter going into midterm elections are usually up 34% we haven't seen that this year looking a lot of the different polls that are out there it seems like the Democrats are gonna take over the house which would just result in more gridlock within Congress which doesn't bode well for growth and the market going forward I don't know what could be negative about gridlock in the in the White House or in in Washington what could they do we've got the tax plan there right yeah I've got the economy that's going you know on all cylinders so why would gridlock be negative you know what I misstated I don't mean that it will be negative what I really mean is that you're not going to see any growth policies really be pushed through there's just gonna be infighting not a lot is going to get done and you're right the market usually typically does well when there is a gridlock in the market I just don't expect increase amounts of there is the same gridlock is good right yeah right and and I and I think that the way that Congress is is positioned now and the way that it's anticipated the election will come out which is the house with the Democrats and the Senate with the Republicans that could change but even if that happens we've got the growth policies in effect we've got regulations that have been cut back we've got tax plan going forward so I don't see what the issue is with that I think gridlock would be fine in terms of what happens with Rosen Stein going forward I don't really see the issues there either to me maybe this is the smoking gun that allows Trump to go after Jeff Sessions and say he worked for you you should have known this you should have kept him in check even then though I think it's a momentary sell in the market but the market keeps going I'm with you I'm more concerned about inflation we're seeing used-car prices move up while oil is not part of the core still the impact of higher energy prices feeds into everything the feedstock so that's my biggest concern so the market seems to be taking a 3.10 ten-year roughly three point window in stride de Bravo your year-end targets 3,000 we're not all that far away from that level as we speak at what point do you start to get a little more bullish is there a chase for a performance into into year-end do you take some comfort that these high-growth sectors which have fueled much of this rally have taken what appears to be a little bit of a backseat these value stocks that should be going up in in what is a very strong economy are finally even with tariffs industrial stocks are performing so well so we've had this price target out for now almost a year and we've had to defend it on many different occasions earlier this year where there was a lot of volatility market continues to be quite resilient I think actually the market probably would have been above 3000 already if it wasn't for trade and trade escalation and an old Terra discussion so for us again we're really looking at 2019 right now if you look at consensus it's implying about 10% growth we think 11 percent is something that's achievable but again that's very much so contingent upon what happens with tariffs if we think that thing things start to converge you get some form of resolution I would say the market probably can move a lockstep with earnings for next year maybe five to ten percent but if Terrance getting implemented then I think we need to perhaps take a pause teres bring the inflation and Steve's correct to identify that I think what you're seeing right now in the u.s. 10 years that you're gonna see a move towards three and a quarter percent I also think when you look at energy right now I think the street is under invested as it relates to energy oil prices you've got Brent above $80 right now the trend for Brent crude oil for the remainder of the year is gonna be higher and higher know myself personally I'm adding to my energy exposure I think the trend is sent there but I think there's a little bit for everyone on a day like today so yes you have some of the value names you you close the gap between growth and value over the last couple of weeks and if you look at the market equal weight versus cap-weighted okay equal weight is slightly outperforming but on a day like today there's a little bit for everyone so you've seen technology names come back a little bit today they're outperforming some of these value oriented in text still on pace for its worst month since its March it is but but but the question is do you exhaust the the move that we've seen without tech coming back it's happened before listen it's happened before again so you might have in July and August borrowed a little bit from September I don't think that changes the overall trend for technology itself Friday you get this communication services sector so talking to a lot of hedge fund managers this weekend they're gonna lose Google they're going to lose Facebook they're gonna lose TripAdvisor they're gonna baba is gonna go into the consumer discretionary much further investments in how much further Josh can the market go up from here without tech joining join me in there well we've proved that it's not necessary this this quarter healthcare is up almost 12% and industrials are up 11% and we made new record highs in the Dow last week a new record high in the SP on several occasions so you actually proved it already that you can have the best leading sector on a three-year basis take a pause and other sectors provided the earnings backdrop is strong and the market itself is stable can take the lead and can push the index to new high look listen retailers at multi-year highs telling them all time highs who would have thought that was possible going back to his recently as December January so yeah it would be great if Amazon wasn't nine percent off the tie and Netflix was making new high every day and Apple was making new high-end events outside do you expect a rebound I'm making the point that it's okay if it's not personally I think the fattest pitch in the entire stock market right now is alphabet technically the setup here I think if you get this thing probably 20 25 points higher where really nobody is down in this stock significantly outperforming Facebook in the midst of this large cap tech drawdown alphabet is the name but but put that one idea aside the bigger picture idea and I think this was alluded to earlier actually gridlock will be phenomenal the American public told the Gallup poll recently that they prefer it including Republicans they want to check on this president at this point even if they're Republicans it's number one number two if you actually look going back to 1950 the stock market does the the third best of any outcome when you have a Republican in the White House and one house of Congress controlled by Democrats it's not the best possible scenario but it's the third that's not negative but that's why we ask the questions to our experts about the political calculus if Rosenstein is actually fired and what the outcome could be if that could tilt the outcome at all America schools or dramatic midterms that's a really good question if you were if you would ask me in December what's the biggest risk to the stock market I would not have said recession or earnings or any of the or oil or any of that stuff the dollar I would have said an exogenous shock caused by something in Washington where we go to Saturday night Saturday night mass massacre and everyone loses confidence in the US stock market at once I no longer believe that's the case because I think the market now expects some version of impeachment proceedings this all non say it'll be successful I'm not saying Trump is in trouble I'm just saying the market now expects this this is the base case that we are gonna have a vicious political know maybe maybe Jimmy the exogenous shock is the Democrats taking both houses and I mean at some point when you got wood shop tomorrow I think that would be the shock only six weeks out let's not forget it's not that way where all of those questions are gonna be asked why because it's very unexpected I mean and I'm sure you do your polls as well everybody's expecting a democratic house and a Senate Republican or choosing a Republican Senate look if they go through impeachment in that in that scenario you've got to stop in the Senate if it's Republican it goes nowhere if it's Democratic then you actually have to think about the investigations go on though let me because the big question here is what has the market priced in at least that's the big question to me we've got a divergence here that's telling us the market is pricing in a lot of bad things what's that divergence you've got killer earnings all right the last two quarters earnings have just blown the cover off the ball and expectations still go higher you mentioned that in terms of five to ten percent growth this late in the cycle five to ten percent growth year over year is incredible but the multiple has contracted two turns since the beginning of the year that is the markets way of saying don't know if it's tariffs don't know if it's impeachment don't know if it's in place you'd think the marketing that all in there and what they yield on the - you think the market has priced in the worst of tariffs yes no you think the market has wait let me get the punchline here okay whatever whether it's priced in all the tariffs are not Joe okay it's priced in bad news that's why we're - turns out no what has he you're never gonna finish dude the mole was contracted because rates have risen slowly and shortly but they had the yield on the - e-excuse me the Illinois - year the older than 10 year they've risen and as a result yeah you should not have an expanding stock market multiple you have great earnings tempered by the fact that money is not as cheap as it was okay so it's not like a rocket science wait a second it's never one thing so don't say that it's just mostly one thing no it's not it's not and by the way we've got earnings season coming up there's been no pre announcements okay this looks like that's basically you now feel free to make your point but let's make them go hearing right then I'll just summarize look you're setting up for another good earning season third in a row what's gonna meet are we gonna have expectations on earnings continue to rise and multiples contract I don't think so it's more likely at this stage in the cycle that the multiple starts to pick up but we have that much of a disagreement on the desk as to whether tariffs are fully priced they're not president there's at this point last week I was talking about that there was going to be a trilateral agreement between Mexico Canada and the US and that's why the market was rally we we have not gotten that so far and I think as it relates to what's going on with the Chinese further implementation of these tariffs raises prices that's a problem for the US consumer that's a problem for US corporations and it is an inflationary impact but the market doesn't autonomy clearly the market doesn't think that it's going to be that punitive to earning 100 this point absolutely I said that I disagree I think what is priced in right now is a favorable outcome at some point can I just come back to his point pre-announcement see I'll disagree facts said put out piece on it last week saying that it's been the highest percentage of negative pre announcements since the first quarter of 2016 but you can't really have it both ways you can't say that so much is priced into the market yet strong earnings which everybody's been talking about and uniformly agrees are going to occur this quarter isn't priced in well that's the point expectations are extremely high going into the third quarter because we've had such great numbers out of the first and second quarter your the expectations are high going into the third quarter you just saw the CEO Business Roundtable confidence come out today CEOs are worried about tariffs you heard ups talk about it they said it only impacted about 10 percent of their revenues so far micron mentioned it we're gonna hear this word on conference calls significantly third quarter don't even need to wait to the conference right right Macy's Office Depot I could go down the list are you all thread Smith and I that and so I think what you after pairs look CEO so do one of two things they're not going to say hey Trump's doing the wrong thing right they'll couch it and say hey we're more cautious going forward because of the cost inputs going higher to your point we had the last quarter in the quarter before that great earnings without the tariff issues and what the markets do after the quarterly announcements what they did what you did have a point and then I want to Bravo fishes in their last time and also you got to use the numbers here two hundred billion ten percent tariffs twenty billion dollars a year on the sp500 I don't think it's going to show up I understand the concern about inflation so I'm not saying it's not there I'm saying it's small and that's in the market that's what I'm saying question whether the worst of the tariffs where them are here listen a year but you've suggested yes I did I'm standing by it you're halfway through what the maximum possible tariffs down if we don't play if you get 25 percent on another you throw in another sixty-seven okay you're you're correct that I'm assuming rationality you've got against you now you've got the referee on you tell if we continue to play a game of I'll see your two hundred billion and raise you another fifty billion that's going to be a problem for the market in 2000 no I think I think tariffs are partially priced in I don't think entirely I think if you do go into Phase three I mean first of all I think if they implement 25 percent on phase two that in itself will likely bring down some of the numbers in nineteen which I don't think it's fully priced in I do think partially it is I think multiple is a function of rates at fully agree I do think that trade however is also something that's limiting the multiple from re-rating maybe not by 2x but regrading by 1x gridlock just another thing I just want to mention real quickly I do fully agree gridlock I think is a positive because out of DC last year you had a pro-growth agenda this year you have an anti growth so you get a gridlock I think the market likes that can I ask you this market has been driven by buybacks if the CEOs get a whiff of a slowdown in growth do you think you'll continue to see the aggressive nature of buybacks that we've seen the last couple more you need to see it even more so if that's what they need to grow earnings they would double down on by that there's no cut back there's no indication that they are seeing this hold on we had Jamie Dimon the the JPMorgan CEO on just a few moments ago with our own Jim Cramer it's a CNBC exclusive interview in Philadelphia here's what he said about the state of the economy America the economy is quite strong and and it's growing at 3% it has been now for a couple of quarters and looks like that way there are no great potholes so let me very well continue no indication from Jamie Dimon sees a whole lot of stuff in the things that he looks at that we're gonna get that slowdown that you say well if we get a slowdown companies maybe gonna buy a little less of their stock back I think look at the big risk is tariffs and impact on margins I think when you look at the economy you're basically looking employment which is very strong job at strong you're finally seeing some wage inflation which is basically helping the consumers and actually there's one thing that if you look at q2 guide as most companies we're actually talking about the consumer strength right so again I don't think that the earnings picture is III don't think it's that clear that you know expect expectations have risen but I don't think they're extreme terrace is a negative but on the other side I think you have an economist what's the house view on what's the house view on the ten-year and quittin and just just the the premium and how small it's gotten and and what do you think really would impact stock prices if it's not you know if we're not really gonna worry about the curve then what would we worry about I'm glad you asked some questions because my next question to you was gonna be we've gone you know 22 minutes here and we've talked about all of these potential risk inflation I get it but the the word the Fed hasn't even been mentioned yet they're gonna be front and center this week how much of a wild-card is that and it plays right into Josh's question yes so look the the Fed hiking rates I think is a gradual negative it is eating into margins slowly but we estimated margins for instance when you look at earnings margins won't get impacted entirely until fed hikes for another at least fifty two hundred bits if you look at interest expense and the debt levels I think the multiple is a function of yield so again if yields move higher say north of three and a half three and three-quarters I do think this becomes an issue but let's first get there again our house view I would say probably is more in line with three and a quarter to three and a half now pension funds u.s. pension funds corporate pension funds government pension funds are just insatiable buyers of tenure Treasury they're getting way heavy into private equity and so to counter that lack of liquidity it's a barbell on the other side they're going nuts on on Troy which i think is the reason for this narrowing spread and not economic concern you would you agree with that yes I've had many many PM's basically tell me acid alligators tell me 10-year yield at three percent that's a buying opportunity for like the whole world yes huge pools because when you look at what's happening abroad when Germany Japan it's so where do you think so the question that I asked people that nobody knows the answer to because we're interested for environment is where do you see restrictive policy now it used to be over 5% clearly that could be there anymore no where is it I would say probably three and three-quarters 4% anything above that I think becomes restrictive unless we have new reasons coming out suggesting growth will accelerate but you don't have your your you know your sector waiting's are what would you recommend right now is the top three places to be in the market we've been pushing the last several months a barbell portfolio I'm sort of using the same same same term here basically we continue to like tech because we do think that late cycle you won't have exposure to growth people pay a premium for gross car sitting but at the same time given how extreme dislocation levels have become in the market we're saying don't be naked on the value side have value anchors we like financials with like industrials we like energy but you're I guess the reason I asked you the question is by virtue of the fact you have those sectors tech financials industrials energy growth cyclical you can't be worried about all that much no we're not we think that the business ugly economic cycle is intact and not just in the US but globally again I keep mentioning tariffs and trade escalation is my biggest worry for 2019 in terms of do we move sideways or do we potentially move higher by 10% when you look at the emerging markets relative to where they are versus the US is that a great opportunity on a longer-term basis we do think so we do think that emerging markets increasingly becoming a very attractive opportunity risk reward is quite attractive positioning is very negative sentiment is very negative I'm with you on this China I mean is basically in a recession territory when you look at the gap between US and China we think look there's there's a lot of interesting buying opportunities it's very difficult coming up with the catalysts and timing the catalyst but again six months at 12 month view we think iam definitely I think the risk though on that trade well you get more reward but so much more has to go right for you to get the reward now I disagree we actually did a lot of work on this recently we had some questions from clients it turns out when you buy emerging markets as Anand as a scepter as an asset class after 20% declines the CNBC exclusive hey again Jeff thank you so much Karl yep we're here with Jamie Dimon Jamie this is quite a commitment to an area that frankly has gone from bank to unbanked city just pulled out over the course the last five years 15 million dollars a network 330 banks have closed in the last 10 years why why not yeah well you know with regulatory reform and tax reform where you now says 20 billion dollar thing going to many cities obviously Philadelphia is the seventh largest mark in the United States that's not including their biggest suburb called New York and you know we and we like to be part of a community we're already here in investment banking commercial banking and private banking retail is a gap so we're gonna open 50 branches 20 percent will be in LMI neighborhoods neighborhoods like this and when we come in we bring the full force of JP Morgan which is philanthropy dollars but to really help people like entrepreneur color funds affordable housing units and and we enjoy it it's good for the company and over time and we're we invest the long-run we never pulling it out of something talked about the multiplier effect and when you open a branch people think you know what we don't need branches anymore everything's digital yeah but brick them more work it's amazing so I think people aren't thinking clearly a million people visited branches every day the type of branch is gonna change the size that branch can change they're getting smaller but more advice so there's a mortgage loan office in there there's a small business loan officer there's a financial adviser but your financial affairs so that'll change but a million people even even the average millennial visits something like three times a quarter so to me the question of brands no more forget they'll change but you still need to serve your client the way they want to be served not the way I want to serve them as you know we've rolled out all these new products too right like like finding the online-only Bank well they do mention this because a lot of people feel that ten years ago one of the problems was the education the borrower the boy or did not know enough about what to do you said to be someone in there literally to help and to teach yeah well that make a difference versus say 10 years ago yeah I've told the people here when you go to these LMI neighborhoods try something special but we're gonna roll a lot of financial education tools we have you invest we're gonna roll out a self advised group and we haven't decided price yet so that you could advise and think about we already put on the screen you can get your FICO score and we're gonna teach you ways and you what you can improve your FICO so that you can reduce cost a bar and stuff like that we have to do a better job not just us but the America educating people in financial matters from rainy day funds to handle you know retirement accounting and so we're making especially have to do that now it's only have things coming out that hopefully our customers will enjoy let's talk about the power of business versus the power of government the government legendarily got big settlements from different banks 13 billion dollars from you yeah Keith Blood says that you paid a total of 44 billion did that money go into the community and did that was that the way to get things done versus the targeted way you're doing well there's this actually UPS community I mean that some of those funds we don't actually know how they disbursed and I think one day someone to look at that and that kind of the past we've moved forward about how we do it for you but this is how you build a community small business lending affordable housing branches and advise people and we know that that works cities you know this City Philadelphia your great hometown I think the city is doing better and better and better but parts it or not and so we do make a special effort in those parts of that city now there is a sense that lending nationally is slowed down I'm not getting that from your bank can you give us a sense of what's going on in places that frankly are unbanked and whether there is a revival that can actually move the needle for you so one of one important thing these things work when you do it with civic society and government okay they don't work we're at each other so we've seen all around the world when mayors not-for-profits businesses work together you can get people jobs you get them in train to get them employed and it actually works and so but in America America the economy is quite strong and and it's growing at 3% it has been now for a couple of quarters and looks like that way there are no great potholes so let me very well continue and so lending it there is a little bit reduction lending in middle market we don't exactly know why large corporations of course bonds public market could clients be to flush I think you know it we do know there's an effect that through tax reform and corporations earning money they need to borrow less it's just hard to figure it ease it out but that really means but if you toe look at employment growth people going back to work it's pretty good alright now last week you told CNBC that it's not it don't call it a trade war call it a trade skirmish previously you have said that there could be at times perhaps a slowdown or at least in the psyche because of the of any sort of trade war how do you feel about trade scores twenty billion dollars of tariffs in and of themselves are a little bit of attack if they're all gets paid is attacks in America many people do other things right they they have the other supply lines but it's a twenty trillion dollar economy so that that is a negative the real negative isn't that it's confidence consistency if people start reducing investment people start moving the supply chains around that we have seen already moves the market a little bit and so and the fear that the skirmish may become a war so we we really don't think it's a great way to go bad it could easily have said some of the benefits they've seen from regulatory reform and tax reform I want you talking about regulate for me yeah Marion Lake said recently a fabulous CFO that we haven't really seen genuine regulatory that would make her happy but there's been so much it's been change of attitude no yeah so I think if you when I travel around CEOs of other industries logistics steel manufacturing pipeline they've all seen it have we seen actual changes in regulation for us not really they have a long list of things they want to do there has been regulatory change for the smaller banks which we totally support to make a little bit easier for them reduced to burn them but it doesn't didn't have any to do for the bigger banks I think I mean in the public's you know we're not asking for throwing out dodd-frank we're simply people so we look at calibrating getting rid of duplication looking at things that hurt the mortgage markets or at this kind of market so you could enhance growth and do it safely no one's looking at you know going back to good old days just recalibrating remember there were two thousand rules it was like one or two was a lot and they were done in haste and people show he's rash and look at cost-benefit you know what makes sense what doesn't all keeping the system safer remember growth a stronger economy it also makes the financial system safer now you just mentioned no rate potholes we've got a Fed meeting that's coming up this week they spread that you would get to intend to use the typical logic that people say means that you can't make as much money and if we can't lend as much so I'm going to say the no potholes the households in good shape people going back to work fight customers say those are fine companies of flage tax reform is still a benefit we don't have the extreme leverage we hadn't Oh 8 and and all the lending has been pretty good prime good good lending so it's not been billing but absolutely there's friction out there there's always friction you open up a newspaper any week of any month there's tons of friction and it's mounting brexit QE turkey Argentina oh and we don't know the full effect of those things so yeah we keep our eye on that but it may not derail the economy you're gonna see separate the two I keep thinking these are all things that should play to your fortress balance sheet strength we've not seen we got European banks that are really really on the run so to speak why isn't JPMorgan making greater presidents given the weakness the rest of the world well we do we're in every country and we're steady growing and we do country by country anymore bankers systems people and all the support risk legal credit compliance so our share in Europe is gone up considerably and and we're just doing for adding people and adding branches and you know the basic good old three yards and a cloud of dust okay when I hear three us I think you should get a higher price dirties vulnerable for Evans sake you're selling it 12 times next reserves we've been at this game for a long time if we're your growth financial with money that's made every single day you open the door why aren't you valued like it's a blossom tea company that's a question you're gonna have to answer then your banks are under still under political regulatory constraints and all that we just went through the crisis I think a lot of people's investors buy always a little worried but you're right worrying very good returns in capital we're growing you know whenever when a cycle hit obviously it could affect the bank but we will manage right through that cycle just like we did it right through the last one okay well when I think about that I think that you must be in there buying stock every day for the company you've chosen a path of buying back stock shrieky but I still many shares you have for the last ten years your share count is not going down enough when will you start getting back to a level that where you really are not what your sopping up the door supply I don't remember the exact number but our share comes down like 15 percent yeah but we're doing six versus ten years ago two three five yeah yeah well there's some have been issued over time but since I've been there it's been coming down so but if you want to look at something I would prefer to spend that money not buying back stock doing this so growing our business is far better for the economy right now we don't have a lot of choices but over time I really would prefer not to buy back stock you know companies to do it would make sense I also don't buy this argument that it's bad buying back stock is simply giving it back to you an investor who then redeploys to a better use its redeployment of capital that should be redeployed if a company can't use it but mine my druthers always to grow our business which we're now doing okay 500 branches we're now in all major cities for investment banking middle market banking etc we've been growing overseas but think about any bankers and people and stuff like that so that is my preppie 2p you invest no building products and services so you're gonna see a lot more for that coming the next 12 months when I think about this and I'm very proud of what you're doing in my home city but I do say okay well Apple of pure capitalist is you know Jamie we're shareholders we should get that money I there's no real instant payoff here within two three years it's gonna take a long time no it's not true I mean first of all accounting you have to be careful about but when we build a branch okay and we put a meaning I don't know we want to give the numbers publicly we put capital in the branch but five years later that branch could could be earning contributing to profit a million dollars a year so you know the the timetable of that new cities it's a little more complicated than we opened a branch to see we're in but again we already serve 60 million households we want to serve 70 million we want to bring them to all the proxy service we have so there there is a financial payoff it just it is not overnight but I don't worry about that I just explained to people like you that that's okay the NPV is very good and it's gonna be negative the first year you know maybe breakdowns by the third year and then a plus that's a spa whore depositors of JPMorgan we're not getting the rate that you're gonna get on the two year when are you gonna start paying your CD and your depositors more when rates came down the it came down like this as race came down 2-0 banks didn't do it so race started going up they didn't pass it on I think now you asleep elope other options money market funds etc but I think now as rates go up the next 25 the next 25 there's you'll see what we called beta you know how much will be passed on it'll go up and up and up well is that going to shrink profitability not I'd be worried not not really because it's we're getting or gaining deposits and the spread that you're maintaining between your cost of funds and your pain would be about the same Jamie you're talking about the Politan just like the politicians did in 1964 you talk about a war on poverty that business seems to be doing a better job you mentioned it in the big settlements from say 2013 when attorney associate attorney general Tony West was kind of after the bank that was you be on the defensive you're playing the offensive and trying to change poverty in this country do you feel that you can do it better in the government no I think I feel you I think government and busy

Channel: CNBC

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Id: OPy9atrILCk

Length: 229min 36sec (13776 seconds)

Published: Mon Sep 24 2018