Global Banker's Perspective, with CEO of JP Morgan Chase Asset & Wealth Management

good afternoon everyone and thank you for joining us for our fifth Walker and Dunlop Wednesday webcast it's great to have everyone with us this morning and this afternoon on the East Coast Mariano's is joining me this morning for our call but she got caught on a New York Fed discussion and she will be joining us as soon as she comes across and I think I just saw her show up on my screen so funny yeah let me start with a quick overview of a couple things in the commercial real estate space I'm gonna make it much quicker than in the past because I want to spend as much time with Mary as possible given a number of people who pre-registered to join us this morning it's obvious that many many people want to hear from Mary and the second thing is that the questions that I've gotten run all over the all over the block if you will and so I'm very much looking forward to diving into that with Mary on the commercial real estate side real quick last week right after this call the national multi-family housing council came out with a report on rent payments through the first five days of April which was a premature calculation on rental payments in the United States the first part of April and many many headlines across the country ran articles saying that rent payments were down dramatically for the month of April as many of you may have seen tenements he updated their numbers this morning and the rent rolls have improved dramatically from the report that animates secret out last week from what we have been seeing across the market rent rolls had been collected at somewhere between 92 and 95 percent month to date which significantly better than the number that enemies he put out last week which was 69 percent the enemies see numbers have moved on across the country up into the high 80s across the board and I am hopeful than many of the publications that ran stories last week talking about a significant degradation to rent payments across the country we'll come back out and update their stories and the numbers there as I mentioned last week the forbearance requests that we have gotten in the walk on Dunlop multifamily portfolio had been very few and I'm pleased to say a week later that is still the case and so what we're seeing in the multifamily space is a is a holding up of rent rolls and of people paying their rent and then also the great majority of owner operators continuing to pay their mortgages and not having to file for forbearance prior to this call I also got a lot of questions as it relates to retail and other asset classes the one thing that I would say is it relates to retail that is somewhat counter-intuitively is that in past cycles everyone is wanted to have credit tenants in their malls they wanted to have the big-box retailers who have big balance sheets and and broad operations and that weakness in the last financial crisis really came from the smaller operators there was an article this morning on the front page of The Wall Street Journal and I have heard plenty of instances where it's actually the big boxes it's the big retailers who are actually not paying right now and it's the smaller local operators who are still paying seems counterintuitive except for the fact that the big-box retailers are getting hit in every single market and the smaller operators a hopefully have enough capital to withstand this step back and be they want to make sure they have their space when things open back up so a little bit counterintuitive there on retail I'm on the hospitality side and we did have a client of Walker and Dunlop's who had a very large hotel in Manhattan which was they were about to throw the keys back to the mezz lender it was vacant and it's a very very large property they got a call from FEMA last week saying they needed to house the medical workers who were on the ship that is in New York Harbor and they have master leased that hotel to take all of the medical workers off the ship at night and have them be able to stay somewhere that's great news for the owner of the hotel the one thing I would put forth the with the rate that FEMA is paying them and their costs of running the hotel they're still only covering about a quarter of their debt service and so if you think about them being one of the lucky ones of actually getting some revenue right now in a hotel they're still in a pretty deep hole given the economics of their property so I won't go through spreads this week and a number of the other things that I've talked about in past weeks but plenty of liquidity in the market on the multifamily side very very selective lending across other asset classes and we are now into earnings season which is actually a good segue into starting my conversation with Mary the first out yesterday was JPMorgan Chase and I think the most noteworthy keys to their earnings release was the 6.8 million dollar provision they took for loan losses which I think set the market up to think that there are there's some real pain in the lending markets coming up so I want to bring Marion Mary is CEO of the asset management and wealth management businesses at JPMorgan Mary manages a team of about 25,000 employees around the globe and they have under management somewhere between 2.5 and 3 trillion dollars that's what the TD not Abby and the size and scale of Mary's operations at JPMorgan quite honestly every time I talk to her it's hard for me to get my head around how big an operation she runs and so first of all Mary thank you very much for joining us today to talk about the markets and what you're seeing I want to start by kind of rolling the clock back a little bit maybe a year where a year ago April of 2019 the markets were performing exceedingly well I would say generally speaking everyone was in a risk on mode and you wear two hats of JP Morgan one running the asset and wealth management business and two sitting on JP Morgan's operating committee if you think back a year how much of a typical day was dealing with your business versus operating committee issues and then where are you today as it relates to the the time that you're spending on your own biz versus broader operating committee issues of risk and liquidity and things of that nature so Willy hopefully you can see me and hear me I can I okay great so thank you I'm so honored to be part of this and I thank you for having me in this dialogue with you and more importantly thank you for everything that you and your company do when you trust JP Morgan to help you as you go through all the great things that you do for so many people across the country and I wanted to hear the spreads and stuff so maybe we'll do that after the next call but it's well it's been quite a while ride the good news is that this is not the first financial crisis or crisis that we've been through so at JPMorgan as you know we've been around for 200 years of the firm itself has been through many but the management team that is currently in charge this is the you know really the playbook from the great financial crisis was the easy part of getting us through what was happening in the markets and trying to think through each of us managing our own businesses but then coming together to figure out the firm and those look that looked like you know some of the early days in terms of market volatility but then what we added to the playbook of how to run the firm from the great financial crisis was really a playbook that no one has which is how do you take an entire operation and get it to work from home how do you think about legal compliance we have a quarter of a million people in our firm where well over 90 percent of employees working from home dealing with customer complaints dealing with still getting cash into the branches dealing with financing of clients and then we have just most recently added to that the PPP program of trying to get cash into the hands of small businesses so that they can continue to function all the while the management team doing that from home and the rest of the employees as well so I think if you've asked me how much is spent on my business versus the sort of firm at large it's hard to to pull apart the two but we have a regular case it's where the operating committee of the firm comes together every single morning and we close the day together with a five o'clock roundup and that's that's something that we put into place right away and then the only good news is we decreased our twice on the weekends meeting to just once on the weekend so you find that nice yeah you mentioned a great financial crisis and sort of to some degree this isn't the first time but obviously with the differences that you just outlined I remember our mutual friend Kevin Walsh said to me back in I think it was q4 2008 as he was sitting at the Fed saying that you know they were looking into the abyss and they didn't really know how far down it went and that every day he would come up with some new plan that they kind of threw at the wall and he and Chairman Bernanke would sit there and say all right let's see what we can do there how how much since you were 2009 how much does this feel nearly similar to the GFC versus no this is a it's a shorter time frame we kind of can see the end now even though it's got some real bumps between here and there give me a sense of his you sit around on the operating committee talking about risk and quiddity versus back in 8 & 9 yes so it's such a good question and it ties in to some of the conversations we've been having with some of the other leaders in the asset management industry but let's just just take the first sort of couple the first couple days of this crisis had it not been for all the people in 2008 who had to spend all that time thinking through which programs would work in which way how would tell work how it and and the negotiations with the government we've reeled off the see PFF the MDC after FML F that the PM CCF the SM CCF health and MLF all within one week just think about that that would be an impossibility to do had we not have the playbook from 2008 so that has worked it is short of the markets the first part of the markets that always go first are the short-term commercial paper markets those were tidied up in pretty short order and then you move to the short-term credit markets then you've been able to help some of the fallen angels for it is the quintessential sort of marker for that having been downgraded and still being treated like an investment grade credit and on and on and so they'll still be pressures in the high-yield market they'll still be pressures with bankruptcies that are going to be upcoming but you have a functioning credit market and you obviously have a very healthy equity market that thinks that this is a very short-lived v-shaped recovery does really what it's pricing it so the question at hand is what is that and if any I don't I haven't met anybody who has that answer because there is no playbook for this there is nobody that understands one there's going to be a vaccine there is nobody that totally understands whether the serology tests will be available functioning and that you won't have repeat virus issues so that we can figure out how to do tracing and we can operate in the developed world the same way that we develop in other parts of let's just think about what China does right you are fully traced at every moment you go on to a subway through a thermometer scan every single subway stop you get a QR code for the for the training car that you're on on the train and then whenever we find that somebody might be sick we will then send you a notice because we'll know where you were and then you will be in quarantine for the time period after like that's not how the rest of the of the globe functions and so there isn't even a playbook we can take from China and say how is this gonna work and how is it going forward so you can't bet against modern medicine figuring this out the question is the time gap how long is that time gap and how many issues do we have of repeat how many businesses can't survive for long periods of time how many jobs will be permanently just how many people will not pay their mortgage for how long what happens to the people in the middle that are stuck between the government saying you don't have to do that and people not being able to keep that operations going so this is this is an unknown for everybody having just come off the call that I was on with it's an investment advisors call where we don't we can't talk about the specifics of what we discussed at the meeting but I will tell you that it's not talking about spreads of bonds and vall and VIX and those kind of things it's talking about permanent damage to an economy what unemployment could look like how much more we separate the inequalities that already exist in a society like the United States and then whether or not you can get some kind of correct corrective measures before you get social unrest and people that just aren't gonna want to stay following the rules that are in place right now so on that so on the Advisory Board of the New York Fed which you sit in the meeting that you just came from I guess a question related to your outlook and then what you're providing to them I guess first how much outside input is the New York Fed looking for at this time and and so it was that call really interactive or as I've sort of them telling you how they're looking at it and then I guess the other part to that question is that in your earnings yesterday Jamie mentioned that the your outlook right now is a pretty you know good recovery in the back half of the year so JP Morgan is seeing if you will some light in the back six months of the year how you know kind of what kind of conviction is there around that because obviously everyone's trying to kind of model out and you guys have new bank half the United States population as it relates to the banking system so you guys have a really good view into the finances of the average American and what people are doing and so a how much are they listening to you and B how much is there other question where GPS the back half of the year so let's answer the first one is maybe easier after 2008 the Fed put together a number of groups to come together and get closer to what's happening either with market functioning and technicalities all the way through to forward-looking issues and one so we mean every couple of months today was a very important meeting where people came together but after 2008 it was really about them having a function to listen and after the taper tantrum it was really a mechanism for them to say maybe we didn't totally understand how the market spinner where we're gonna react and that was the biggest crisis at the time and so we got much more active and today was was exactly that so all of the great numbers that are on that committee which are the leaders of most of the largest asset management companies in the country both on the mutual fund side as well as in the private equity and real estate space talking about everything from the the functioning of the emerging markets to bond markets in the future and negative rates to energy to you know the Fed already having put 2.2 trillion and probably he's gonna you know be ready to put whatever it takes to keep to keep going so they're listening and we're also giving them feedback on the programs that have worked that they put in place that have been very helpful so it was a really great dialogue and I think it's a very important part of bringing government and business together especially in times like this when we shift to our business at JPMorgan Chase it's just like you Willy and how you run your company or oh you know many of your clients who are listening today you you have to have to like totally different bipolar mindsets one is the how am I going to run my company should think you have to plan for the worst right you always have to prepare for the worst so you're constantly running the company with like what if it gets super bad what if it's not a v-shaped recovery what if is a very long problem how do I run the company how do I keep employees communities shareholders all of that in balance what do I need to do differently what things do I need to cut how do I deal with vendors how do I deal with location strategies how do I deal with being global and having different parts of the world open at different rates than other parts of the world what can I learn what can I not and and so we all have that mentality of running our company and then we have the investment mindset and you have to be very hard and cold about the company stuff versus how you're managing the money and so when you think about how clients are managing money you don't bet against the US stock market it's the greatest form of capitalism in the world is where the most entrepreneurial businesses exist in the world and we will rebound and we will come back now the stock market seems to already have that as if we are you know we're at that place and it's not inconceivable that we don't get back as fast as possible but getting portfolios in line for that is very different than making sure that your company so yes our economic forecast is that but we have loan loss reserves that we put up to make sure that we have a balance sheet we will always want to be a fortress balance sheet in good times and in bad and we want to Zig when the world is sagging and so that's what you're seeing us do so that we can continue to lend to small businesses to consumers to large companies to continue to function and you're seeing most of that work really well so if you just if we go back a month then because I think you're putting all this into perspective and and trying to take into account how quickly things are moving Glenn Hutchins was on CNBC this morning talking about the fact that the objective was to flatten the curve and we had flattened the curve and sort of saying let's you know let's take the let's take the winds that we're seeing out of this in any way but let's also realize that you know a month ago the challenge was to flatten the curve and we have actually flattened the curve as you're getting on those operating calls every day does the is the my sense right now is that everyone this week after last week of somewhat of euphoria of it looks like we're gonna flatten this curve and we're gonna get on at least controlling the outbreak of this virus and the markets obviously rallied significantly this week everyone's kind of waking up and saying oh well now what next so as if you if you can help me a little bit thinking about how you all both to the point of we got to look at the downside which most focused potentially too much time on right now versus when do we start to look for opportunities in the market to put money to work etc etc how you know you've got the two sides that you've got to manage one is clearly on your operating community cause I'm assuming it's all mostly downside protection and yet at the same time you manage 2.5 to 3 trillion dollars for your clients where you've got money managers across the globe saying ok we ought to be putting it here we ought to be putting their how do you kind of bifurcate those who views you have to take the long walk in between meetings but maybe if you're a student of history you look back at all of the all of the times where we've had Wars and civil unrest and and invasions and none of them none of them except for the oil crisis in the 70s were fundamentally market changing each one of them if you had the foresight to ride through you would you would ride through them so yeah again you have to separate out that brain and that's exactly what the stock market is doing right now it could be right or wrong but it will eventually be right and you know whether it's whether it's overly exuberant at this current moment which I think we might be seeing some signs of it will it's generally in the direction of the markets will continue to find new highs as we go through time mark things will adjust there will be winners and losers and we will continue to invest in the US economy so that's that's what people should do and what people should continue to focus on but but right now I think the world is trying to think like I don't understand how do I think about sports how do I think about you know it's football coming back what isn't happening that catarata college football is a very good you know topic of conversation right now and how does that play itself out and and the more you think through all of those things you realize like the entire country has to figure out how to get it back together because you can't have just pieces of this working and other pieces not but if you focus on things like what the Business Roundtable are doing you know they have planned ABC for for getting people back to work I think you're gonna see the US government pushing hard to be able to get some sense of normalcy and that's gonna have to coincide with serology testing and other things to try and figure out like how do we take the healthy people get them back in the system get things functioning and still be able to protect those who are more more vulnerable but as Glen did say this morning we should celebrate the winds of flattening the curve we're gonna have fits and starts there's rumors of you know the Bible virus can come back you can get it a second time it's much longer for a vaccine we are well none of those are Noble Truths but there's some very helpful things in the pipes with some of these pharmaceutical companies that could come on and you just can't bet against that so let's turn to China for a moment you touched on it earlier briefly as it relates to if you will some of the some of the things they put into place as it relates to controlling their population that are probably far-fetched for us to think about in the US but you sit on the us-china Business Council and know a lot about China and JP Morgan has a huge business in China last week when I made some comments during the webcast about data that was coming out of China I got a lot of people coming in and saying can you trust that can you trust that can you trust that so I know that you know your business is run by Howard Wang over in China and and some of the notes that I picked up in in a recent call were that the supply chain looks much improved a lot of companies have brought people back into company dormitory so that they can get back up and you're going the auto industry is operating now in China at about 80% capacity KFC is back at 90% in terms of new store openings malls at about 50% with increased daily traffic restaurants about 70% airlines 40% capacity but International is nothing it's 5% and then the one major caveat that came out of the notes that I saw was that you know Beijing is still on lockdown and anyone coming in and out of the city must go through a designated Airport and also must quarantine themselves for two weeks taking out for a moment marry the very real if you will societal controls that China has over their population that everyone says you can't really use it as a model for the u.s. clearly these numbers out of your business and what you all are seeing give some people a playbook as it relates to once we control the virus and get quote-unquote back to the new normal this is kind of what a rebound would look like and thoughts as it relates to that data and how much we ought to look into that or just it's so different from the way that they're do they dealt with the virus that you really can't look at the economic data as a road map it is it's not data that is the same way that we look at our data that we know there are regulations on the way that they report things capacity utilization is a very different concept so to say that the malls are you know 50% of where they work doesn't mean that people are shopping at 50 percent of the rate it means that the traffic walking through the malls because it's a place to go out and you can see the pictures of the people walking through the mall that's okay at least it's a sign of people getting out of their house and getting back to back to some semblance of life which is the first step and then getting back to having the the economy fully function and so we now have a call every morning with the China a team and we have the analysts show us different pictures of restaurants and things and we go through some of those stats and get like yes the airlines are back but I'm not sure that the seats are taken in each of the planes that are flying like you know see you would want to drill you if you were all of us who are unless at heart you would want to drill down on that information and make it look like the other information that you're relying on you can't do that you can just take it as a symbol or a sign of sort of where it was and where it's headed to and they do have the ability to put people in dorms for two weeks and then quarantine them and make them have them all go back and like wouldn't that be great if we actually can do that because you could get entire industries back up and functioning but that's not the way that that that we work but I am very hopeful and a lot of those a lot of the signs that we see and then you know you can extrapolate back to some of the bigger cities also like Hong Kong and Singapore where we have people coming back into our offices running the a/v PlayBook but I just think the way that we all work is also going to be very different I don't think everyone's gonna want to go sit a trading floor the same way that you wanted to sit on a trading floor before so now maybe you weave in the ability to do certain jobs from home and that real estate may be you need the same amount of space but you have much less densification of that space and so there's all sorts of things that need to be thought about and the companies that are thinking through that now as opposed to sort of sitting there in shell shock and not figuring it out and what you know sort of waiting for someone else to figure it out are the ones that are gonna be behind so we're we're working through all that stuff as I know you and your company are and I think I think those are the companies that are gonna be the end game winners and we're gonna come out of this it's it's it's going to be fine the question is the time gap between where we are in a day and like little steps of normalcy we don't need to jump back to total normalcy we need to work our way into little steps of normalcy do you think that the us-china relationship that was quite frosty leading into this after were through this either gets somehow mended because the trade war was suspended by this crisis and were working in collaboration as it relates to how to fight it or do you think we kind of snap right back to where we were ahead of time as it relates to the sort of frosty relationship on trade and other issues yeah I mean it it's gonna be hard because for sure they're sorry blame game issues going every which way around the world's not not just us China so I think that there's there's we're gonna have to work ourselves through that and then you just gonna have to work yourself through like a zoom meeting is not the same as a as an in-person meeting a lot of how we hold ourselves together as countries coming together was a lot of in-person cross travel from one country to another to try and figure out how we're gonna mend fences and when you listen to dr. Kissinger and others talk about how that's gonna have to happen I mean we're gonna need some time for that so and countries will be more isolationist for a while you we may not open Travel Airways in the same way that we did in a very quick time period as I think countries are gonna are gonna want to fix themselves first yeah I'm not I'm not sure about you but I have to tell you I am I'm already just both tired and also physically tired from zoom meetings I get up in the morning it you know and I get on zoom calls at 8 o'clock in the morning and I get done at 6 o'clock at night and whether I haven't gotten out of my seat or not I'm just physically exhausted from the pace of this world where it's sort of there's no break there's no moving from one meeting to the next there's no traveling from one office building to the next and it's just it just saps my energy I don't know I don't know I mean I can only imagine you know it's like such an important topic because they are the most intense days any any of us have ever had just work alone forget about the the interaction that you have with your family and tight quarters and trying to figure out who does what and whatever nerves you are already on each other they're just heightened as you go through time but an an eight-hour day if you were lucky enough to get it is the equivalent of a 12-hour day you know a month ago because the 12-hour day a month ago had you know walking to the cafeteria go get lunch every meeting had sort at at least five or ten minutes in between it that you did sort of nonsense stuff or you walked around that doesn't exist anymore and if you don't force yourself to have some boundaries around how your life is gonna function like this is just gonna get super miserable because no one's going back to work as normal some up next week right and nerves are going to continue to increase and we have this saying at JPMorgan that you know everyone thinks then their job is so important then they come home and they're like why are you bothering me my work is like really important I can't believe that you're coming in in the middle of this meeting with me and Willie Walker like this is like so important and well we all realize is we just invaded on that it's completed in the opposite and until you get your head around the fact that like you haven't made it on a on a on a function of a house and you brought your entire company into that you gotta get through that mentally and then you got to figure out what are the rules of the road and you gotta figure out how to have fun and you got to figure out how to make new habits and keep your health whether that's meditation physical exercise like whatever it is but you have to put the boundaries around yourself and you have to like take a physical cloth and put it over all the computers at some cart during the day and like step away from the car and and leave because if you don't the mental health issues are really damaging and and we all need to we spent a lot of time with our Employee Assistance Programs doing that but if you don't work at a company that has those kind of things you know getting on some of these apps that are really helpful and just like investing the time to listen to the podcast to listen to the how to do even 5-10 minutes worth of meditation it can it can really help ground things on that Mary there's a little out of sequence of kind of where I wanted things to flow but I think this is such an important topic that I just want to dive into it for two seconds kind of back to the frame that I was talking about of the first three weeks for sort of crisis management get everyone distributed out into homework all the challenges that that created and then also kind of just total inbound and then last week was this sort of oh we actually are flattening the curve and markets reacted and everyone was sorta like oh this feels a lot better than the last three weeks and now we're an answer what next mode have have you have you done anything with your team because I mean you've got such a you know your team is global they're 25,000 people in it much less the other you know quarter of a million people who are in JPMorgan in all as it relates to sort of shifting behavior shifting schedules shifting requests as we move into this sort of longer period view have you all put anything in place to your point of like putting a putting a cover over the the computer monitor or what have you have you started to move into really changing from that kind of crisis management mode into more of okay let's settle into this and what's the real change we're gonna make to make this enduring if you will yes so two things come to mind when you ask me that question but first is something probably everybody that's that's that's on this call has done like trying to first starting your days together and ending your days together are really good ways to put sort of boundaries around that so we always start our day every day with a global good morning meeting which in some places in the world is nighttime and we do not have that on Fridays for Asia's sake and I think by the way that's something that we've been trying to do for years at JPMorgan which is hey could you not have a Friday morning meeting for anybody globally because you're eating into someone's Friday night well now that everyone is living in a in an interface computer world they're now taking it seriously they get it they get what that feels like and so maybe that's like those are some of the good permanent changes you can make in your company but ending your day together also having like a finite way because there's a lot of people on your teams however you're working that they don't know what to do they may be feeling lonely they may not they may be new to your company so they're not like in the regular flow they don't know the person that they can just call and have a casual conversation or get some help and so constantly how book ends of checking in and then also finding the time in some of those meetings to have the virtual you know cocktail or the where you're famous your favorite sporting gear or show your pets or you know all those fun things we try and and infuse that and we do a lot of that the other thing that I've been trying to do is just drop in on zoom' meetings which i think is also just think about the number of people you can see and interface with that otherwise you would have had to you know fly to the Philippines for that meeting and and fly to Madrid for this meeting and it takes up you know a day or two of your life whereas you can be present in the whole hour-long meeting and then you go to the next hour-long meeting so actually think it brings big companies together in a sort of really special way and you also again you get to see their home and you get to see a little bit about their own cultures where they're living etc and I think people are getting a little bit more comfortable and like letting their guard down and if the dog jumps up on the lap it's okay and it's not because again it was a little bit of that you know at least at JPMorgan like well we're supposed to be perfect and like you people are all bothering me don't make any noise this has got to be JP Morgan just moved inside of our house and it's not like no one in the world has that so let's all just be real and be human and and get to know each other on a very different level yeah let me let me turn to some research from JPM that Michael assemblers put out and just get your thoughts on it for a moment first of all Michael's research is so incredibly insightful and just powerful but this week he put out a number of graphs the first were on sort of komen nineteen in the the the looking at rural numbers of countries that are getting hit hard others that aren't the death the mortality rate etc etc and I don't want to get too much into the the actual data there but more on sort of the the thing that I took from the data was first of all don't be too quick to draw conclusions that one country is dealt with this perfectly and another one hasn't dealt with it that perfectly because invariably these know and charts are sort of zigging and zagging all over the place and right as you think that one country has done a great job with it they get a spike and then when you think somebody else hasn't done a great job but that they all of a sudden start to turn down and then the other one that I thought was really really insightful was not kind of worrying about a v-shaped recovery or u-shape recovery but much more on the lag effect of GDP following the crisis and following when markets start to recover can you talk about your takeaway from the data you're seeing from Michael a as it relates to the virus and B what really should we be thinking about as it relates to the recovery and using his framework of not so much is it a B or u but more of just keep in mind this lag effect of GDP behind crises yeah so Michael and I have been working together for 23 years and he's one of the smartest minds I've ever met I'm super fortunate to be able to learn from him every day on kovin 19 jamie and the operating committee have asked him to be the expert for the firm and so he puts out this information on a real-time basis it's on the JP Morgan homepage if anybody wants it and it's not it's not there to make a better prediction than someone else it's that he is spending a hundred and fifty percent of his time talking to medical professionals all around the world and thinking about all of the things that he learns and then combining that with a lot of the great coding work and big data analytics that we have as a firm as JP Morgan and applying that to things like this and so what you quickly learn is that almost every model that was used within the first couple weeks was way over the basic took little bits of information extrapolated them out combined two or three variables and then made these predictions that every single one of them has been wrong thus far and so when you don't have a data set of anything in the past obviously things are hard to predict in the future but he's begun to unpack that and is trying to have a better sense of how to make some predictions going forward knowing that both the numerators and the denominators of every stat that you're reading around the are incorrect right so people are dying not in hospitals and it may not be recorded people are dying of other things that maybe they just never even got tested for kovat if they were to die anyway maybe overly counted walked away or another and then of course the denominators the really the thing that we don't know and hopefully it's a much bigger number which would cause a greater set of the population around the world to have to have the immunity to the disease as as we go forward so he's spending a lot of time on that work and what people who haven't worked with Michael for 23 years wouldn't know is he's generally pretty sour on a lot of this stuff and he is much more on the hopeful side of what you're hearing all the different people who think about how the economy is going to rebound so I would just tell you that that's where he is on that and knowing we could all be wrong and that the santa fe tests that look like they work that they're doing on moths could be very helpful like that could fail and then we're and then more you know back at stage one at least with that company on vaccines or it could not so we're always monitoring and adjusting those but the the world will rebound lots of things will be pent-up demand and other things will just mean never be repeated so we will have a big chunk of lost gdp we will have a big chunk of things we are just not going to do the same in the future we are not going to do a lot of things in the future and that hasn't even at all been calibrated like lots of the big asset management firms have the war rooms that are all the smart analysts are in the room thinking about like which parts of the economy we're never going to come back which things are going to change forever but like they're the same as you and me we're all living this life brand new we don't really know it's hard to extrapolate out and only time will tell so I think each and every day it's just about making sure that people have the wherewithal to live a life that's comfortable that have shored up enough shored up enough asset liquidity make sure that portfolios are unbalanced and know that they can weather the storm but then have enough dry powder that should markets present themselves some pretty interesting things that they could take advantage of it and so you can get a very strong rebound of GDP in the back half of 2020 or the beginning of 2021 and that's that's you know that's what the whole full base case is so you've been pretty outspoken pre-crisis about the proliferation our huge growth in the in the triple B debt market so the lowest rung of investment grade where I believe the number that I heard you stayed in a previous interview was that it's grown from 1.5 trillion a couple years ago to four point five trillion pre-crisis and you talked at the beginning about Ford being downgraded yesterday or day before yesterday when they came out with a statement about their balance sheet and having 30 billion dollars of cash on hand as you think about the recovery is is either the lowest rung of investment grade or junk debt something that's a big concern that could actually trip us up as we come out of this absolutely there's no I mean there's this credit unwind is being temporarily suspended by all the Fed programs that I reeled off at the beginning of this call but not not the regular part of the markets not the high o martyrs there's nobody in there buying that stuff you're going to see bankruptcies and when you see bankruptcies you're gonna see wholesale repricing of things and that just has a delayed muted effect right now like people are living off of trying to get some of these government programs trying to think about you know but it's only so long that you can have a fallen angel and then okay maybe it's captured in the program so maybe it has artificially high pricing right now because it was caught in the only downgraded you know in the most recent time zone that's not it's like that's not sustainable these companies have to actually make things that they sell to make a profit to be an ongoing concern or not and so I think I think the credit markets are in for a big readjustment and it's for sure it is all about good old-fashioned stock bond and stay pricing like they are not all made created equally at all so anything you bought in a pooled vehicle or in an index or like that is this is not the time for that kind of mass beta exposure I think I read in the earnings release yesterday that you all took a eight hundred and eight hundred and fifty million dollar provision against your bridge book but in putting that into context I think the number that Jamie gave was that your bridge loan book was a quarter of the size of what it was heading into the great financial crisis yeah and so I guess to some degree to your point of there will be defaults there but as it relates to those defaults hitting the banking sector it's not nearly the exposure at least from a bridge book as it was back then and then also you guys are just wildly better capitalized today than you were back going into the great financial crisis yeah I wouldn't spend a lot of time worrying about the banks right now this is a very different crisis than 2008 and I also wouldn't spend time worrying about the well-run company who has been very wise about structuring their finances they're not over their skis like they were in 2007 before the great financial crisis had they they have very cheap financing they can pull down on their revolvers the banks are there to lent to them and the same in the consumer market if you just go back to January when we were headed in when we were heading into this you know people don't have anywhere near the leverage that they had the debt cost financing on a per capita basis as low as it's ever been and so not everybody has the money to withstand long term crises in their lives but a lot of people are in much better shape and then when you add to that if there's any kind of forbearance or credit forgiveness for short periods of time you just knock it you're not going to see the same problems in the for lack of a better word well capitalized parts of the consumer or the or the you know regular corporate markets so you mentioned a really well run business and you obviously work for someone who I think is going to go down as one of the great business leaders of all time I think I mentioned you that I think that you know Jack Welsh was the business leader of the 1980 to 2000 era and while Bill Gates and Steve Jobs were in that same era as great incredible visionary entrepreneurs as someone who actually managed a business I think Jack Welsh is probably the person people look to and over the last 20 years I think there's plenty of a case to say that the Jeff Bezos is of the world are incredible visionaries and and entrepreneurs but someone like Jamie Dimon has as a leader and as a manager of a business is almost in a class unto himself what is it what's it like working for Jamie and and what makes him so special as a leader not just kind of a year ago but today I mean so let's just start with the fact that he woke up one morning a couple of weeks ago and is so in tune with his own health he said you know something just doesn't feel right and he and his wife Judy got in taxi cab and went to the hospital and found the tear in his heart before it actually caused any kind of a heart attack and after a very long surgery came out of it and has been recovering at home and working completely non-stop as if you know nothing had happened which is no different than when he went through his throat cancer ish issues and he would go in for chemotherapy and then he would show up in the office you know a half hour later and there it just there are people in life that have strength and resilience and a will to work super hard for the greater good of the you know quarter of a million people that work for JPMorgan Chase and the communities that were in and the companies that we serve and like he is the role model of that by far this is not about him working for his sake he's working to give everything he's got here to apply it and especially in crisis moments and so it's just every day his ability to run the whole ship but then just try deep dive drill down into any particular issue that seems to be coming up in order to then solve the problem with the team at hand and then let it go let them go let them go fix it it's just a gift that we all have that's what everyday we we see that it teaches all of us how to do that same thing and then it cascades all the way down all the way down the company so everybody is a player-coach you cannot be a leader at JPMorgan Chase unless you could do both of those things you can run a very efficient operation and then you can drill down when necessary on whatever the crisis is at hand and you know there's great stories about Jamie where he'll in the old days he used to get like a lawn chair and he'd set it up in the hallway of something and like count the number of people that came in and out of the computer room and then when he realized that nobody actually came in to get the papers that were printed he was you know able to shut it down and the old folk folklore stories of you know counting black cars which now there aren't any he's probably counting uber pickups or something and the expenses of those but it's just it's just a relentless focus on attention to detail which great leaders like Willie Walker has is what makes a great company and you can just see it they just they they thrive on and every day and they're like junkies for the information for the for the pulse of what's going on and they don't need to know everything that's happening at every moment it's not it's not like that it's that they want to know so that if you need their help they're there to be able to help and piece it together and so we're really lucky I think one of the most noteworthy things as far as accomplishments that Jamie's been able to do it JPMorgan is that on the operating committee there are six men and there are six women and you have obviously been an incredible leader of the asset and wealth management business at JPMorgan and I and I believe that there are now more women inside of JP Morgan Asset Management than there were in the entire industry when you came into your job what have you done to have such incredible success at both recruiting mentoring and creating career paths for women inside of JP Morgan I would say it couple of things first any of us women at JPMorgan Chase are just like the women at the tops of all these other companies you don't ever want to have gotten there because you were a woman because if you did it's the whole tone of how it works in the company won't be sustainable so the fact that it has been so sustainable at JPMorgan starts with somebody like Jamie Dimon he hasn't hire people because they're a certain color scanner because they're a different race or religion he hires them because they're really good at what they do and that's proven out over time once you set the standard that that's why you're hiring diverse talent and you're putting them in their jobs then the really good diverse talent shows up at your doorstep and wants to work at a place like that and so you have to be able to see it and then you have to be able to replicate it all the way down but you know so we have 40% of our portfolio of our assets under management are run by female portfolios like in the asset management industry that's just like not a thing and well why is it a thing I because I don't know I lose good money manager on the bond side and like I met some really smart women like Susan Bao and others who run our core equity or Clair Hart who runs our equity income and they're like smart people I've ever met so why wouldn't they run the portfolio it would be strange for them not to and and putting them in that spot and then letting them run and then the results speak for themselves so it's a and you want to work at a firm that you know you're there again because it's results driven not because of any other reason no quotas no nothing and and then that's assault once you get it to that level it's a self-sustaining self-fulfilling prophecy and that's a great company that that we work in because of just that and you can see it by the way you know you talked about like the different ways that we've been working in the company yesterday I was on an LGBT Q zoom and it was across the whole company and it was just another way that we keep our business or resource groups going in times where you you're not doing regular way stuff you're coming together and you're talking about those those issues and and so we have all those different groups women on them of all those conflicts and they they they give people the ability to get to know other people in the company that they wouldn't normally interact with and they wouldn't have a reason to know and and it's irrespective of levels so you can be a brand new analyst talking to a very experienced managing director about you know what it's like to come out of the workplace and that's like really real and genuine and and and and that those that's the heart and soul of what makes a good company and diverse company work well so I have time for about one more question which is that I think people will kill me if I don't ask you not for investment advice because I got plenty of questions ahead of time of should I be going into this or should I be going into that and clearly not you know you love Tesla and you don't like Microsoft or whatever the case might be but given the discussions going on inside of your teens as it relates to are we risk-on risk-off are we equities or we bonds are we looking for you know are we are we completely out of emerging markets because the crisis is about to hit them really really hard are we in oil what have you just generally speaking what's the you know where are you all looking for opportunity right now as it relates to putting money to work we are definitely on the prowl for all that stuff that's a just about to show its little signs of weakness you think about all the moments in time where you wish you had looking back had the dry powder to be able to say gosh somebody had to get out of that private equity holding them they had and you have to feet all of a sudden you find a secondary market for private equity oh my gosh somebody you know couldn't couldn't buy that great piece of real estate and so then Walker Dunlap comes in and buys it because it's a because they have the wherewithal they they've worked on a really important fortress balance sheet they've got it and they're ready to they're ready to seize the opportunity so we've been spending a lot of time with all of our teams on the portfolio saying you guys stay invested because you want to be here for the long term in these markets but you have to have a part of that portfolio it's there you wait you season it and then you pounce on this stuff and there's just gonna be a lot of that stuff that you're gonna wish you had had the liquidity to do and right now it feels like a really good time to make sure you've got some of a liquidity so Mary I just I want to thank you so much for joining me today on this I know for a fact that the over 5000 people who were listening will have gleaned a lot from your comments about the way that JPMorgan is managing the world we live in today and the way that you're managing the business that you on inside of JPM I wish you and Phillip in your girl's health and safety over the coming months as we figure out how we're moving forward in these crisis times and I want to thank everybody on the webcast today for joining us it's a real honor for me to be able to both represent everybody at W and D on these calls and then also to be able to ask friends like Mary to join me and to give these incredibly insightful perspectives on the world where we're living in today so thank you again Mary I hope you have a great day and everybody else on the call have a great day and we'll see you again next week thank you an honor thank you thank you so much

Channel: Walker & Dunlop

Views: 6,872

Rating: 5 out of 5

Keywords: CRE, Commercial Real Estate, Economics, Economy, Walker Webcast, JP Morgan Chase, COVID 19, Coronavirus, Mary Erdoes, JP Morgan, asset management, wealth management, Great Financial Crisis, planning for the future, economic outlook

Id: 3rNkLd0XnKo

Length: 56min 43sec (3403 seconds)

Published: Wed Apr 15 2020