JPMorgan Chase & Co. (JPM) Earnings Call Transcript & Summary

Okay. Thank you, everybody. Please grab your lunch and your seats. We'll get started here. So I'm Brian Ossenbeck. I cover transports for JPMorgan. Very happy and privileged to be introducing our keynote speaker for today, and I hope to facilitate some questions along the way. And of course, there's mics in the room, and there'll be some mic runners as well. So I encourage you to get up and ask a question because we're fortunate to have Bruce Kasman, who's the Chief Economist for JPMorgan and the Global Head of Economic Research. So we've got a team of about 30 economists worldwide, the integrated detailed country analysis with a top-down approach to really look at the global economy. And clearly, there's quite a few things moving at this point. So the team has really been, I think, at the top of the polls since they ever came out in 2019. So they've been #1 in the global economic rankings in the fixed income poll. And Bruce started his career at the Federal Reserve Bank of New York, International Research Department, PhD in Economics from Columbia. We really respect his views and appreciate them in -- and of the team. So I think it's a great time to turn it over to him to give us a little bit of what he's thinking about, what he's worried about. And then we'll certainly have a lot of time for Q&A afterwards. So please join me in welcoming Bruce.

Okay. So I guess what I'd like to do is lay out a few of what are our key views about what we see happening in the U.S. and global economy and then use that for jumping off to discuss how we should interpret what's happening in global financial markets in the last few days with obviously a particular focus on the Fed and how it might affect the nature of where the U.S. economy is heading. So our global outlook, which we put out around Thanksgiving, was entitled wait for it. And I think the big part of that story was about understanding that dynamics in the U.S. and the global economy, we're looking pretty powerful in some respects. You have a Fed tightening. You have inflation pressures that are persistent, but that time is an important factor in terms of how these things come together. And basically, our call is comprised of 3 building blocks. The first one being the U.S. nor global economy was at much risk for going into recession in the first half of 2023. That may or may not sound controversial at this point. Three months ago, that probably was controversial when over half of the economists forecasting in the Bloomberg survey actually had a recession in the first half of the year. There's no doubt that the Fed has been moving aggressively. It's moved 450 basis points in a year. There's no doubt that, that monetary tightening is significantly influencing the economy. Anybody who has any connection to the housing market can see that. And there's clearly other places where that's evident. But we felt that there's really 2 other things that people haven't been appreciating enough that has been playing out here in a way that really promotes resiliency. And the first one of those is simply the fact that at the same time that the tightening in monetary policy is a building drag, we're in the process of fading the drags that came from the supply shocks of 2022, both the pandemic-related supply chain problems as well as the reverberations of the Russian invasion of Ukraine in terms of commodity markets and in confidence and other things as well. That's a fairly powerful force. And I would just say in passing in the U.S., there was also a fairly substantial shock early in 2022 as government transfer payments began to go away, as government spending on COVID programs began to go away. That was a big drag. And as we're turning into '23, we have COLA adjustments. We have state and local governments ramping up. We have some infrastructure spending coming into the picture. So the world is not just about monetary tightening. It's about monetary tightening being a drag in one area and other things, which are actually moving in a more positive way. The second thing and perhaps the more interesting fundamental story is that Fed tightening, particularly in an environment of tight labor markets, which I think we can all agree exists in the U.S. today have traditionally been precursors for recessions. But one of the real important reasons why that translates into recession is because when labor markets are tight, when inflation pressures are building, we're also seeing vulnerability in the private sector, the maturation of an expansion that creates leverage on balance sheets that begins to erode profit margins because labor bargaining power is picked up. The dynamics in terms of leverage, overextension in some key sectors in the economy. And what's remarkable about the U.S. as we look at it today is, yes, the labor market feels late cycle. Yes, the Fed is operating like we're late cycle, but the private sector is remarkably early cycle in just about any metric you want to look at. And that positioning of the corporate sector, that positioning of the household sector is not going to stop the Fed from slowing the economy. But we should understand what a recession is. A recession is a break. A recession is an environment where businesses particularly are put into a position where they're forced to shed labor, where they're forced to pull back on medium-term spending plans. And in an environment in which corporates are actually financing today, all of their investments from internal sources on net, there is no external financing that's needed to finance the investment levels in the U.S. in a situation where they have a substantial amount of cash on their books, in a world in which there's not much debt rollover in 2023, it's going to be very hard to push this thing into what we have traditionally thought of as a recession, which is that break in behavior. Not that growth is going to be immune to tightening, but the slowing turning into a break, the bending turning into a break is just not that likely to happen. So those have been our 2 key themes in a story that says, wait for it, that the recession is not going to happen right now. The second part of our story is the idea that we're not in recession now -- and by the way, I should just say that -- and I'm not going to focus on this much. But part of that fading drag story is a fairly important lifting that's taking place today in China, and we saw in today's data. We think the Chinese economy on a sequential basis is probably growing at about a 9% pace in the first quarter of the year, and the European economies having whether the energy price storm are now starting to lift as well. And for what it's worth, global manufacturing has been very weak in the last 3 or 6 months with a key focus on tech. And the survey data, at least globally, the Asian export data suggests that, that weakness is not over, but it is starting to abate. Okay. So that's sort of point number one. Point number 2 is I don't want you to take from this the idea that resiliency now is a sign that we are going to be able to extend this expansion that much longer. And here, the problem really is about inflation. And there is no doubt that a good part of the spike in inflation we saw in '21 and '22 reflected things related to those shocks that I mentioned a minute ago that are going away. And you are seeing headline inflation come down. You are seeing some of the labor cost pressures that were built around the dislocation in the economy around the lockdowns and the aftermath of that. They're starting to fade from the scene. But as a result of death, as a result of weak immigration, as a result of older people leaving the workforce early, we have a shortfall of somewhere between 3 million and 5 million workers today than with the path we were on before the pandemic. Supply chains are coming back to normal, but the way people do business and moving things around the world is not coming back to where they were. And 2 years of very elevated inflation in the U.S. and in the rest of the world has shifted psychology somewhat. How much? It's hard to know, but it shifted psychology in a way that changes the price and wage setting patterns. So what's happening here is inflation is coming off of those ridiculous highs that we got to multi-decade highs in the middle of last year. But there are forces that are going to limit that move down and not going to get us to levels that we think the Fed and other central banks around the world are going to be comfortable with. And the dynamic of central bank tightening, the dynamic of time, together, will promote tighter credit conditions, will promote the gradual erosion of that corporate sector health that I talked about, and will gradually build the vulnerabilities that ultimately we think will be both necessary and generate a recession dynamic. Now the last point I want to make is that anybody who wants to watch when the apple falls off the tree is a little bit crazy if they think they can time at that exactly. And my last point is to say that if you don't think we're on a soft-landing path, if you think we need to have a recession, that's fine. But to be able to confidently say U.S. economy is going to slide into recession in this quarter and we're going to have this peak terminal rate for the Fed, that is not something you should do with any degree of confidence. We felt that the more likely timing of the recession is sometime around the end of this year or into early '24, but I think there's a range of outcomes. So we've been pushing the argument later, at least relative to where people were thinking coming into this year, higher in the sense that the Fed and other central banks would likely have to do more to deliver that kind of weakness. And part of that was also based on what we were looking at in terms of the lack of stress in credit and financial markets more generally as the Fed was tightening in 2022. But also deeper, there's a common argument that has been raised that said the next U.S. recession is going to be shallow. And if anybody wants to use the global financial crisis as a criteria, I'm all in. We're not going to have an event like the global financial crisis, probably not in the next 30 or 50 years. I probably should touch wood when I say that. However, the most important criteria for determining whether or not recession events globally are deep or not is synchronization. And the synchronization of the inflation problem, the synchronization of the central bank reaction functions and particularly what's happening in Western Europe where European central banks, the euro area, ECB, Bank of England, the Scandies, all are facing very similar problems of inflation to the U.S. suggests that if we are going to have a Fed dynamic driving recessions in the U.S., those dynamics are going to be sympathetic elsewhere in the world and therefore, more likely to create a recession, which isn't like the early 2000s where the U.S. went into recession in 2001, and Europe and Japan didn't go or the early 1990s or the early '80s where these events tended to be rolling events that played out over 2 or 3 years. It's not the GFC. Nothing, I think, in our future, I think will look like the GFC, but it's more likely to be synchronized and therefore, have more significant ramifications broadly globally than you might perceive just thinking about U.S. fundamentals by itself. So that's been the story line we've been focusing on later, higher, deeper. Now the question is how do things change as a result of what's happened really in a remarkable 10 days where -- last week, at this time, we had Chair Powell telling us the Fed was behind the curve and might have to do 50 basis points. And now the market is pricing in Fed easing in June. In fact, it's pricing in over -- last I looked at the screen, it's pricing at 100 basis points Fed easing by the end of this year. So what's happened? Well, it's not in the data. If we looked at the Friday payroll report and we looked at yesterday's CPI and even the retail sales report, by the way, retail sales report was down, but it was down a lot less than expected. And you take January and February together, consumer spending is tracking something close to a 4% gain in real terms in the first quarter of the year. The economy is not the issue here for markets. The issue, of course, is the stress in the banking system and is the potential risk that, that spills over and turns into a much bigger and far more impactful global event. Now I have to say, I've been doing this for a long time. And if I learned anything looking at the macro economy for multiple decades here is that economists don't understand plumbing. And the last thing that they should do is tell you that they understand when financial markets start to come under stress, where that's going to lead to and how deep and how broad that event is going to be. I do not know that. What I do want to say to you is that if we're not sitting here feeling that markets are seizing up and feeling that the world is coming to an end in the next few days, the Fed will tighten next week. It's going to use the argument that its financial stability tools, which it employed over the weekend to provide a liquidity line to banks is going to be sufficient to manage the problems of the U.S. banking system, while it can continue to use its interest rate tool in order to manage the inflation problems that it's going to face. It very well might have tightened 50 basis points next week if we hadn't had this stress given the amount of strength in the data and the inflation news we saw. I think that's off the table. The debate now is between 25 and 0, and there's a case that the financial stress will rise to the level that will scare the Fed. But I think the most likely outcome is still that the Fed goes 25. Again, there is a risk here that we are seeing spillovers that are going to be far more impactful and potentially more disruptive in a way that can do damage and potentially even throw the economy into recession in the near term. But I would say, I still think we should understand that this is not like 20 -- 2008. This is not a story that's reflecting over extension and weakness in the private sector. It's not reflecting an inherently insolvent position of the banking system overall. So this is more likely to play out something like Orange County, LTCM, which were significant events and I don't want to minimize them, but they were events which didn't throw off course the path that the U.S. or the global economy was on. It had regional implications in both of those, and I think this event will have some regional and sectoral implications, no doubt. So if we're right -- and I'm not trying to stand here and ignore the risks that were wrong on financial stress here. I think we should understand what the implications of this event is which is that over the course of the last year in the 450 basis point tightening that the Fed has delivered, there's been remarkably little stress in credit and funding markets. That's been really amazing to watch as we've been going through it, and it's been one of the calls that we've been making that said the Fed has to do more in that environment, even though the amount of tightening they've done looked quite large. But now we're flipping the switch and we're getting credit stress. We're getting shifts in funding. And however you want to look at this, the position of the U.S. banking sector is going to change here. Funding costs are going to go up. Lending is going to be less available. Regulators are going to be tougher. That is going to shift. And risk appetite does not look to us like it's going to return immediately even if it could stabilize in the next few months. So I think if you are a more marginal lower quality credit in the U.S. economy, life is going to get much tougher for you, high-yield borrowers. If you are a small company that relies on relationships with regional banks, it's going to be touch and go depending on where you're banking is, but more -- generally, you're going to have more difficult time. However, if the economy is still fundamentally sound, then if you're a high-quality credit, things are actually going to be easier. If you're an investment-grade corporate and the Fed is taking a more careful approach to raising interest rates in the backdrop of these stresses, the borrowing terms are likely to be easier and credit will still be available for you. If you are a mortgage borrower, it's quite likely that 2 or 3 months from now, mortgage rates will be lower if they will respond with a lag to 10-year yields. And the housing market will start to stabilize in this environment. Now will this change in a material way, the timetable of the next recession in the U.S.? I think that's a hard call to make. There's every risk and reason to be concerned that the pressure that comes on the weaker links in the credit space could end up to be more significant and magnify out through the system. However, there is an offset and there is supports that are coming. There is a global economy where things are set to improve here. So for the time being, I'm not changing my timetable. I'm not putting as much risk on the Fed raising interest rates, but I think you would need a recession or an outright global financial crisis of size to get the Fed to ease. So I think the markets are overshooting now in terms of the pricing of the Fed. I think the timing of the recession still feels to me more likely to be end of this year into '24 at some point. But we have more uncertainty. We have more risk, particularly the near-term risk of a crisis that, again, simple-minded economists are not good at tracking and monitoring. So we'll have to clearly watch this space very carefully in the next few weeks. The last point I just want to make to you is that recessions are disruptive events that reverberate, and therefore, we shouldn't only think about a recession in the context of the move down, but we should think about it in the context of what it means for the next 4, 5, 6 years. And I would just want to emphasize to you that if we have a synchronized downturn, we are unlikely to have synchronized powerful policy responses from fiscal authorities. Monetary authorities certainly will be able to lower interest rates and probably significantly. But I do think the event will be deep enough to take a lot of the inflation pressure, if not all of it out of the system, but it will also be lasting in a way that we should understand that in terms of the credit space, in terms of other things that tend to be significantly damaged by recessions. We will feel that. And I do think the most likely event for the U.S. is to see an unemployment rate, which currently is at about 3.5%, go up towards 6% and possibly even higher. So on that bright note, I think I'll stop and see if we're going to go to questions now, questions, comments. Everybody, feel free. I think we're using these mics in the middle of the room, and please feel free and come up and say something.

There's a mic coming behind you.

So I was actually intrigued by your Orange County analogy. Like to sort of what extent does this sort of rookie mismanagement of interest rates, which is what brought down Orange County and brought down the Silicon Valley Bank arguably, like sort of do a solid for the Fed? Remembering like '94, it was really severe, but within the 3 months, Greenspan was done for that cycle of tightening.

Yes. I mean a few observations that are -- make that period interesting to look at, the Fed by the way. So in December of 1994, Orange County blew up, and your analogy, I hope, is right because it will tell you something about what happens, and it reflected mismanagement of -- I think it's more than mismanagement of interest rate risk. It was just levering off of bad interest rate bets by the Treasurer of Orange County. Remember, you also had a somewhat similar dynamic playing out with the Mexican sovereign crisis taking place at that same time. Interestingly, those events both happened in December of 1994, and for what it's worth, the Fed tightened in February of '20 -- of 1995, 50 basis points. So the Fed did not stop in the face of that stress. However, the implications of that story stopped the Fed and its tracks after that and until we really saw whether or not the economy went under. And the economy didn't go under. And I think the reasons the economy didn't go under were related to what we just said a few minutes ago, which is, at that point in time, the positioning of the private sector was not vulnerable, and that helped a lot. There was also, if you remember, in '94, Europe and Japan, were actually accelerating. They were coming out of their recessions at -- which started 1.5 years after the U.S. recession had ended. So some of the similar dynamics are at work here. The Fed has moved more now, of course. And there is always a risk that what we're seeing here, which is not a specific municipal credit but a more broad-based set of pressures on small- and medium-sized banks, turns out to be larger. Obviously, the more lasting difference between then and now is that in '94, '95, we then entered a phase where we had low inflation for the better part of 5 years, both because U.S. productivity picked up as well as because of the Asian crisis. So the Fed didn't have any further pressure to move it, in fact, was able to keep rates lower than where it got to in early '95. So some of those similarities, I think, are there. We'll either look at this in a year's time as an interesting example of how these sort of shocks can hit us and not throw us off course or we'll look at this quite differently. I think it's still a little bit premature to know how much. But there is interesting lessons to be watching through that experience.

The U.S. government, are they borrowing too much? And should we -- do we need, in fact, a new sequester, if that's possible?

I think the answer to the first question is easy, yes, not just the U.S. government but most advanced economy still run large deficits and have built up. Just for the point of reference, the public sector debt-to-GDP ratio across the advanced economies since 2007 on the eve of the global financial crisis, since then has gone up 50% of GDP. That's a huge increase. The reason why it hasn't been on anybody's radar screen is because through all of that period up to the last year, borrowing cost of debt had been going down and have been sitting at rock-bottom levels. But if we're moving into a world where you're now having to pay more, you're going to see pressure. I'm not going to take the call here as to exactly how you're supposed to respond to it. And in fact, if we are watching the Fed engineer something that will be a recession in the next year, 1.5 years, I don't want the U.S. government to start aggressively tightening fiscal policy. If I can assume you're European, I would say that, that was a big mess a decade ago when they followed stress in the system by tightening fiscal policy and magnified problems. But there's no doubt that as you look at the picture over the next 5 or 10 years, choices are going to be constrained and some sense of responsible fiscal policy is going to have to be put in place here to manage the extension of public sector debt. As I said before, the private sector is in really good shape. But part of the reason the private sector is in really good shape is because of all the supports the public sector has delivered to it, and it's sitting on the public sector debt side right now. Jamie, do you want to ask a question?

So Bruce, I -- Jamie Baker with JPMorgan. Bruce, I appreciated your comment that economists shouldn't be plumbers and...

I'm also in my personal life, not much of a plumber.

Good to know. And certainly, from where I sit, I don't see us as being on the cusp of another GFC. And I recognize that, that call is somewhat outside of your area of expertise. Just help me recollect, and I should know this because my office is down the hall from yours in 2009, when did it become apparent using your tools what was actually happening? So when did the events really begin to influence what you look at?

So I think I would say there were 3 very specific elements of that crisis. The first was 2005 and 2006, where housing activity in the U.S. actually peaked in 2005. The Fed was tightening policy. It raised policy rates over 2 years, 425 basis points. So you could see the downward move in housing, and you understood that there was a significant overhang that was going to be a problem for the economy. What wasn't appreciated, and I'll say that about myself personally, is I didn't appreciate the problems that, that would create for the financial system and the fact that, that would ultimately push housing prices down, which would magnify problems for the household sector. But that was the first part of the story. The second part of the story was the summer of 2007 when the commercial paper market started to seize up and you were beginning to see stresses in the financial system that kind of continued into the Bear Stearns. It was a hedge fund that went under. And you were starting to see the problems in the leveraged financial system in the mortgage market. But what was interesting then and might be something of a lesson now is the U.S. and global economy actually lifted into early 2008. And the U.S. economy now is perceived to be in recession in early 2008, but actually, the actual GDP numbers were still in positive territory. And there was actually strong news globally. Then as you moved into the summer, the stress has started to build further. Energy prices went up to a crazy level, and Lehman happened. And that combination for us has just kind of blew this over. So I don't think you went into a crisis where you understood the nature of the crisis right away. And I think part of the issue around where we are now is there may be a lesson here that this might be the first step on a set of a few things that happened that ultimately do become part of the next recession dynamic. And the recession dynamic itself magnifies some of the financial pressures that today may seem more limited. And I -- that is kind of my mindset here, is this is a step on a path, but it's not the end of that path. But we'll see. And again, I'm not going to claim to have a great understanding of these linkages because I could argue the other side, which is in '97 and '95, these things came on as quick. The stresses built pretty aggressively. You felt like things were going to break. They ultimately didn't break. But for a while, it was really feeling touch and go. So one here. Here and then we got one here.

So you say we have a worker shortage of 3 million to 5 million people now but that we could be seeing 6% unemployment down the road. So how does that transition? When do we go from shortage to surplus?

When we go into recession, that's what recessions are. So I mean, I think the point right now is you're having job creation. You have tight labor markets. You still have pressure on costs and companies, as you look at the inflation report this week, they still have pricing power. So they're not getting hit that hard in terms of their margins. It's not that margins are staying at the peak levels, but the pressure on corporate just isn't that great. So then some combination of high interest rates that gradually create pressure as you have to overset your lending as credit becomes less available, which will be part of the story around this, as the Fed isn't going to take much off if the economy is not in actual stress, as these forces start to build at some point here -- and again, one of my points here is not to get too cute on timing it. At some point here, there is going to be enough pressure to cause businesses to pull back. And it's when that happens and when jobs are being shed when labor demand is weakening, that you're going to see a greater alignment of the labor market between demand and supply. I'm hopeful but not confident that immigration flows are going to pick up, that some but not all of the early retirements in the participation rate will be reversed. But I don't think that's going to happen independently of weaker demand to normalize the labor market. I think you're going to have to hit demand. And that's what recessions are about, losing 2 -- 3 million jobs in the economy over a period of time.

But -- so what section of the economy are these marginal workers in? Is it the bottom?

What sectors are the...

You are saying that we have 3 million to 5 million...

We have a shortfall of 3 million to 5 million.

Now is that part of the...

Shortfall of labor supply, not of employment. But in the employment data, we are above the level of employment we were in 2019 but not off the path we would have been had you had continued the job growth that the trend was on. So the economy has maintained GDP levels at the pace that we were on before 2019, but it's partly because productivity has actually moved up. But that's not necessarily a good thing because it's not a story about companies becoming more productive. It's about demand having shifted away from low productivity services industries and towards high productivity, goods-producing industries, which is now starting to reverse. And that's one of the reasons why job growth is still strong as you're rotating demand back to more labor-intensive parts of the economy. But we have an employment picture, which is still below the path we were on in 2000. So when I say there's a shortfall of jobs, I'm not really talking about that. I'm talking about the shortfall of the labor force, which is what's created the tightness in the labor market.

Over there, a question.

Yes. Question About China and sort of downside risk to economic growth. I think you had mentioned first quarter forecast was like about 9-ish percent GDP. What's your easy part and hard part. What's your forecast for the next 2 years' growth? And what's -- what would you say are the odds of, what I'll call, a significant downside disappointment to that growth for whatever reason, like, say, a debt crisis or political change or a structural shift or what have you? Like what are the odds that the China reopening story really disappoints? And you can define that however you like.

Well -- so our forecast for the year as a whole in 2023 is now close to 6%. So the disappointment in the fourth quarter is being followed by a very strong first quarter, and we expect growth to average somewhere close to 6% for the rest of this year. I think on the issue of whether you can be disappointed, I think we've already had enough data that says that this reopening is underway. It's taking hold. I think there's a legitimate question to ask how much of that will spill over to better news elsewhere. It is a domestic consumer services-led recovery, which will probably have less spillover to the rest of the world with the exception of the travel industry, which you can already see has picked up quite a bit to some countries in Asia, not to the United States and a little bit more to Europe, and that's happening. But the question about goods demand and how does that spill over to exporters in the U.S. and Europe, there's clearly going to be less than the GDP number would suggest, but I don't think you should ignore that. And where I think you could get disappointment is not so much in the near-term China growth being much lower but whether those spillovers will be there. We are in a world in which industry has been weak for the last 4, 5 months. We are hopeful that it's about to turn but there's an issue around how much of the unwind in tech is going to continue here. There's an issue, obviously, about inventories. So I think we're -- if I wanted to focus on disappointment, it would be less about whether China in the near term delivers strong growth, but whether that growth delivers positive spillovers for the global goods producing industries. The very high frequency news in Asia is encouraging to us, but it's not by any means decisive in terms of whether that turn has started to take place. You saw it today. The Empire survey in the U.S. is still very weak in manufacturing. So it's still not clear in the profile of whether we're getting that recovery or not. In terms of where we're going to be in '24, our baseline would be to say China gets back to 4% to 5% growth, but that's obviously going to be very sensitive to whether the U.S. and the rest of the world is in recession. So we are building in weakness in the U.S. and '24 being part of that China story. So if the U.S. is not in recession, you could add to the China story. And you could also say if the U.S. and Europe are both in recession, maybe we're actually at risk of being disappointed there.

Time for one quick. Time for one more. All right. I'm going to try to do a quick one then, Bruce. Just from the -- obviously, industrial conference, we hear a lot about manufacturing nearshoring, reshoring, venturing, whatever you want to call it. From your global perspective, is that something that we're just going to keep hearing about, maybe you see in certain areas and certain industries? Or are you really seeing from the bottoms-up analysis that yes, there's really, opposed to supply chain crisis, there's really a lot of momentum here to make good use of the crisis and make some changes as opposed to just maybe talking about them?

So let me just throw out maybe a couple of stray observations on this because I'm not sure I can tie all the threads together. I mean one thing to just realize is, to some degree, that is a euphemism for people moving production out of China. And actually, China's share of global exports is considerably higher today than it was before the pandemic. And keep in mind that China, during the pandemic and the early stages of the recovery, was the factory sector that was open quickest and that served them very well. In addition, they were making a lot of things that were being demanded in the world, medical supplies and other things. So today, China exports are still higher as a share of overall global exports than they were before the pandemic. So in that aggregate sense, we're not actually in a major way moving things away. Having said that, you are seeing the signs of things moving. And you can see an obvious case is Vietnam and Asia, and you can see some things happening in Mexico and places like that. I think the way I would put the story together is rather than calling it a deglobalization or any of these other terms, I think we're moving towards regionalization of supply chains, both because of the politics as well as because of the ramifications of the pandemic in terms of dealing with issues around reliability and price. You have 3 major demand engines in the world. You have the United States and the Americas. You have the European Union in Europe, and you have China. And I think what's happening is people are going to be moving their production to be closer to where the demand is. It's more akin to what happened in the auto industry after the trade wars of the 1980s. It's not that everybody produced their own cars, but Japanese and German producers move to have North American hubs and European hubs and China-related hubs. And I think that's more the nature of what should evolve here. The question is who's going to be the beneficiaries of that. You would like to think that in the Americas, there's a broad benefit that comes to the LATAM countries as a result of it, but I'd say just as a general observation, LATAM policymakers are shooting themselves in the foot generally in terms of setting in place the kinds of conditions that make that attractive. In Asia, you have the problem that if you're going to serve the China market, there's nobody really has the scale to provide that capacity other than India and India has its specific problems. And then in Europe, you are actually seeing the dynamic having moved in an interesting way, but now the conflict with Russia is starting to create some tensions on there. So I think we should track it as a regionalization story, not as a deglobalization story. It's moving slowly. China hasn't yet really been hit by this, but it is part of our story about China growth in the next few years being slower. And I think it is a theme that should continue to move forward as we -- and obviously, adjust it for whatever geopolitical overlay you want to put on that.

That last part would make another 40 minutes to go through, but unfortunately, we're out of time. So thanks, Bruce, for sharing your views. Thanks, everybody, for listening, and have a good rest of the conference.

Thank you.