Eye on the Market 20th Anniversary Podcast

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Logo: J.P.Morgan. Text: Eye on the Market. Brown swipes past, then reveals a split screen. On the right, a man in glasses sits in front of an office background with the logo J.P.Morgan. On the left are twelve covers from previous Eye on the Market issues. Text: July 2025. 20th Anniversary: 20 years of Eye on the Market.

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Good morning, everybody. This is Michael Cembalest. It's early July 2025, which means it's finally time for the launch of our 20-year retrospective for 20 years of Eye on the Market, which some of you have been reading for a while. And in 2005, we launched the Eye on the Market to share our views on markets, investments, economics, politics, science, energy, and other topics with our clients, to inform them what we were thinking and to give them an insight into how we were managing their money.

And so now, at the 20th anniversary of the Eye on the Market, I selected 30 of the more memorable topics for this retrospective out of 584 of them. And I tried to pick topics that are as relevant to the future as they were to the past. And in aggregate, they represent some of the most important lessons about investing that I've learned-- sorry for the wobbly camera-- in more than 35 years at JPMorgan.

So this is going to be a very brief podcast, just to share with you what some of the topics are.

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Text: Eye on the Market: 2006-2013. 1 Nov 2006, A warning about subprime and derivatives.

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So, starting in 2006, we began to warn about subprime and derivatives.

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Text: 2 Oct 2008, Investors should be bullish on government recapitalization of the US banking system.

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And then, in October of 2008, we had a great piece on the benefit of government recapitalization of the US banking system and why that was a bullish sign.

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Text: 3 Dec 2008, Oversold market conditions and the bovine anatomy of the global recovery. 4 February 2009, The Rime of the Ancient Mariner: systemic risks of banks and broker-dealers differ...a lot. 5 Apr 2010, The flawed Euro project, Lego minifigs and countries beginning with the letter "M."

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In 2010, we had identified all the problems with the euro project, because there were some really bizarre economics going on where Northern and Southern Europe kind of moved together like two geese until the euro was put in place. And then all sorts of economic relationships blew up in Europe.

And we did this exercise with LEGO minifigs, and countries beginning with the letter M, and how they were more homogeneous than the European Monetary Union. Anyway, you can take a look, the LEGO minifig dioramas in there. And this had real-world consequences for returns. As we all know now, the US crushed Europe in equity markets over-- since we wrote that piece.

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Text: 6 Jul 2010 Bank stress tests, a Ransom Note and the Five Stages of Greece. 7 Mar 2011, The world is a very resilient place: reflections on the Fukushima nuclear disaster.

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Pardon me.

Then we also have a piece from 2011 on how the world is often a pretty resilient place after wars and natural disasters. And it was a piece I wrote immediately after the Fukushima nuclear disaster, and with also some interesting commentary on exactly what had happened and the human error that led to the failures at those nuclear reactors.

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Text: 8 Jul 2011, The Capitol Grille and options to reduce the Federal debt. 9 Aug 2011, The 60 Minutes municipal bond scare and our "ARC and the Covenants" response.

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Again, 2011, we had another really interesting piece that was a-- it was a program on 60 Minutes where they had a real scare on municipal bond markets. If anybody remembers Meredith Whitney, she kind of was warning that the whole municipal bond market was going to collapse. And we went through all this analysis and showed why we disagreed with that. In the subsequent period, I think muni default rates have been like 0.1%.

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Text: 10 Nov 2013, Course of Empire and the true origins of the US housing crisis.

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And then, in November 2013, this probably was my favorite Eye on the Market. We took a closer look at the origins of the US housing crisis. And it's kind of remarkable where the facts lead you, because they lead you to a very different place than the official government narrative about why the housing crisis happened.

And there are some quotes in here that I pulled from some HUD reports, Housing and Urban Development, in the years 2000, 2001, that make it very clear why the housing crisis occurred and what the catalysts were. You can take a look at that.

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Text: Eye on the Market: 2014-2021. 11 Apr 2014, Bottom feeding: equity markets generally bottom before just about everything else.

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And then, for investors, probably the most important section of all of them was a piece we wrote in April 2014 on bottom feeding and how equity markets generally bottom before just about everything else. We start in the Great Depression. And then we looked at various recessions over time, all the post-war recessions. And what were the sequence of events? Unemployment, well, credit card delinquencies, mortgage delinquencies, high-yield delinquencies, PMI surveys, payrolls, industrial production. And how quickly do equities bottom before all those other things start to get better?

My favorite chart of all was from the global financial crisis, when bank stocks bottomed in early 2009, when only 8% of all of the bank defaults had even happened at that point. So imagine putting yourself back at that point in time and being told, yep, the bottom in the banks-- the KBW index is in, even though more than 90% of the ultimate bank failures are still to come. That's how much of a forecasting, leading mechanism, equity markets can be.

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Text: 12 Jul 2014, Geopolitical risk is a generally poor signal for investors. 13 Sep 2014, The Agony & the Ecstasy: the benefits of concentrated stock and hedge fund diversification. 14 Apr 2017, The Chart that Everyone Hates: how entitlement spending is crowding out everything else. 15 Apr 2018, A food, energy and mineral weighted map of the United States and the Electoral College. 16 May 2018, The Thucydides Trap, mercantilism, semiconductors and espionage: on China and the US. 17 Nov 2019, The Armageddonists! A cottage industry of doomsayers has been expensive to listen to.

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And then, later in the decade, we had a great piece called "The Armageddonists," which some of you may remember, where we highlighted some of the professional doomsayers. We picked about 15 of them. And we do a long bonds, short stocks from the week of these Armageddonist comments. And we track what would have happened to your money over time. It's a great chart. Made lots of people upset.

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Text: 18 Jan 2021, The coming COVID inflation surge. 19 Feb 2021, SPACs will be a disaster for equity investors.

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And then-- but you got to play defense too. And at the height of the SPAC boom in February 2021, we made it pretty clear, in a piece called "Hydraulic Spacking," which is kind of funny if you like those kinds of puns, were going to be a disaster for equity investors. And we explained why. And then we did a follow-up a couple of months later explaining why it was about to get worse.

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Text: 20 Jun 2021, Finally, a proper measure of industry-wide private equity performance.

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And then, in 2021, we started this every-other-year process of digging into better measures of industry-wide performance of private equity that were less reliant on venture economics, and Greenwich associates, and voluntary reporting by the private equity firms themselves, and were more based on a custodial service that had access to all the LP flows. And we explained what the implications and what the conclusions were from that.

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Text: Eye on the Market: 2021-2025. 21 Dec 2021, The Vaccine Wars. 22 May 2022, Whydrogen? Most green hydrogen projects are economically and energetically infeasible.

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And then, more recently, another example of where economics and science can affect markets-- in May 2022, at the height of the hydrogen hype, I made it clear that most green hydrogen projects are both economically, and more importantly, energetically infeasible. And then, of course, a lot of the hydrogen stuff collapsed in the years subsequent to that.

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Text: 23 Mar 2023, A first time for everything...bank failures due to bad asset liability management. 24 May 2023, US equities outperform Europe for a reason. 25 Aug 2023, Rasputin: the fallibility of yield curve inversion as a recession indicator.

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And another really important piece from 2023-- that was the year when everyone was focused on the inverted yield curve. And the yield curve inversion had a perfect track record going back to the late '60s, eight for eight, eight yield curve inversions, eight recessions within 6, 9, 12 months. But we felt that this time was going to be different. Now, that can be a dangerous statement in the world of investing.

But I had a lot of conviction about why I thought that we weren't going to have a recession and why the yield curve inversion on its own was an insufficient recession risk indicator. That's a great piece. And I think people should be familiar with that.

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Text: 26 Sep 2023, What was I made for? We ask state-of-the-art AI models 71 questions from our archives. 27 Jun 2024, Revenue-sharing. US sports league parity and soaring US sports franchise valuations. 28 Jan 2025, The bet of the century: hyperscaler capital spending on AI infrastructure. 29 Mar 2025, The real pace of the energy transition.

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And then, again, the real-- another piece that we had on the-- just from this year, on the real pace of the energy transition. Of all the projects that I work on each year, that one is the one that I spent the most amount of time on and I'm most proud of after 15 years writing a piece that is broadly and widely read and followed, not always agreed with, but everybody at least respects the amount of research that goes into it regarding the energy transition.

And Vaclav Smil, who was our technical advisor for the first 11 years of that publication, was enormously helpful to me in terms of how to think about the energy ecosystem.

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Text: 30 May 2025, On tariffs and penguins. Eye on the Market: Extra Sections. My favorite US political exhibits from the Eye on the Market. Something to offend everyone. Medical breakthroughs: on artificial intelligence, biomedicine and CRISPR 2.0. Artificial intelligence is creating amazing new pathways in biomedicine. Some of us may actually benefit from them in our own lifetimes. "Just So Stories": How I ended up in my current role in Asset Management. How a small piece of candy and a dinner party I was not invited to changed the course of my career.

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And then, just to wrap up, there's three extra sections at the end, a collection of my favorite political exhibits from the Eye on the Market. I have something in there to offend everyone.

A section on things we've covered in the Eye on the Market on medical breakthroughs, whether it's CRISPR, or biomedicine, or artificial intelligence. And then lastly, a personal biography, autobiography, on how I ended up in my current role in asset management, and how a small piece of candy and a dinner party I wasn't invited to ended up changing the course of my own career at JP Morgan.

So that's what's in this anniversary edition. There's an online digital version. There's a PDF that you can read.

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Text: Twentieth Anniversary. A bound copy of Eye on the Market.

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We're also printing a select number of these bound books, which I'm showing here, that have some of the covers that we-- the artwork. And then the whole thing is bound together. So I hope everybody gets a chance to see this 25th anniversary retrospective. And let me know what you think.

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Text: The next Eye on the Market, later in July 2025. Q&A from the Eye on the Market client mailbag.

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And just to wrap up, later in July is usually when I answer questions from the Eye on the Market client mailbag. And so we have a piece that's almost done that we'll be releasing later in July on issues such as, why are the backlogs for gas turbines so long? The longest section will be a piece on, why are US health care stocks so cheap, and biotech as well? And what would it take to change that?

Some analysis on how China is managing their rare earth exports, some information about US steel tariffs, checking in on the YUCs and the MEGAs, which are our acronyms for Young, Unprofitable Companies, and how those are priced. Apple's AI paper got a lot of press.

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Text: Apple's AI paper vs real world AI applications.

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I'm not sure how important it is compared to the latest news on real-world AI applications, which we cover.

Some comments on deportations and US farming. There is some excitement about changes to US bank capital regulations. We explain why as it relates to changes in the supplementary leverage ratio. The implications for the financial system are rather modest. And then lastly, there were some really interesting data from the latest study of GLPs and semaglutide on dementia risk. So that's in the mailbag for July.

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Text: July 2025. 20th Anniversary: 20 years of Eye on the Market. Twelve covers from previous Eye on the Market issues

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And thank you very much for listening. And we'll see you next time. Bye.

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Logo: J.P.Morgan.