저자: RayDalio/진행자NikhilKamath · 외국인
요약 보기
달리오는 금을 법정화폐 대비 핵심 가치저장 수단으로 보고 포트폴리오의 5~15%를 금 또는 대체화폐에 배분할 것을 권한다. 법정화폐와 과다한 부채 생산을 비관하며 비트코인에는 소액만 보유하고 선호도는 낮다고 밝혔다. 인도는 향후 10년 성장 조건이 가장 좋다고 평가했다. 미·중 기술 전쟁과 상호 의존 축소 흐름을 짚었다.
다듬은 글
Hello everyone. I created as leading indicators of what countries have their ingredients project the next 10 years growth rate in the years best. I think India over the next 10 years has all the ingredients to really be the strongest growth rate and and improvement. Youngster in India who's 25 years old, how does he make money?
Uh two things I'd suggest. First, play the game. Find a game that you love and then be around people who are pros at playing the game so you can chat about it. That's a good path. How do you view crypto in the world of Bitcoin or even like stable coin? Tell me this, if you were to back You got to give me one question at a time.
You're Okay, let's do Bitcoin and then we'll say the coin. Hi Ray, uh thank you for doing this. As a trader myself, I've been trading now a long time about 21 years. I think there will be a lot I can learn from you and many others back home in India like me can also learn from you. If I can contextualize the audience we are talking to today, they are young Indian wannabe entrepreneurs, uh investors, wannabe traders, people who want to make a living in the stock markets.
I would say between the ages of 18 and 30. Wonderful. That's that's exactly the the group that I would like to speak to at this stage of my life because I've learned a lot and then I just want to pass what I've learned along to those people. So thank you for allowing me to do that. No, thank you for doing this.
Everybody knows you, but if we could go through like the big events of your life and very briefly just to set context again, could you tell us how you look at your life from the very beginning, from when you were younger up until today? Okay. Um my dad was a jazz musician. My mom uh was a sort of stay-at-home mom.
Um I was raised and um I didn't have any brothers or sisters. Um it was a loving family. Um it was um not poor, not it was lower middle class. Um I did jobs when I was young. Uh I one of those jobs was caddying for at at a golf course. And because I caddied at a golf course at the time when there was a stock market boom, the people I caddied with I would have conversations with and I took the money I earned, $6 a bag, I carried two bags, $12 for a round.
When I got $50, I would put it in the stock market. And so I started um playing around in the stock market much like you're describing our audience does. And um the first stock I bought I bought only because it was the only company I ever heard of that was selling for less than $5 a share. And I thought, well, then I can buy more shares so if it goes up, I'll make more money, which of course made no sense.
But it was a company that uh was about to go bankrupt, but another company acquired it and it tripled in value. And I thought, this is easy. It's not easy. But I got hooked on the markets at 12. Do you think it's like that I often think about this. There was a really tiny when I was 17, I bought this company called Mars Soft, a defunct software company in India.
And the share price again doubled or tripled. The first experience of the stock market, the people who tend to continue are the ones who get lucky. Do you think so? I think positive reinforcement works. I get it. Reinforcement. Yeah, sure. If you lost money on your first trade, you would never have done it maybe.
Probably, you you know, you put your hand on a hot stove and take how many times do you do that and then react to it. So I can't say for sure, but probably. But I got into the game. Like it was a game and it was it's a great game. Mhm. If you play it, you think of it as a game and that if you play it well that pays you money.
Do you think the stock market has emotion? Does it treat you a certain way? Everything I I think it's unemotional. We are emotional. And we certainly have emotions. And that's one of the reasons the way I learned to invest uh was to write down my criteria when I was making a decision. Every time I'd make a decision, I would then think, why am I making that decision?
And then I write down the criteria and see how it would have worked in the past. It took me a while to do this because of it my experiences. And also, you know when you're wrestling with positions, particularly a position that goes against you, Yeah. you know, you're wondering, am I missing something?
And then how hold up how long do I hold that position? And what do I do? So emotions and intellect and lack of perspective is a problem. So when you have a decision rule that then you know how it would have worked all through time, now you're just playing that decision rule and it helps, you know? Did you trade on leverage at the very beginning?
Um I didn't trade on leverage in the beginning, but I bought in the beginning very early in my age I bought futures cuz it would give me leverage. Yeah. Okay. I decided very Nobody traded futures. Right. Okay. There were no commodities. It just very little. Okay. But um I realized that it would give me leverage.
Mhm. And so I figured if I was going to be good in the markets, I would want to do have that leverage cuz I'd make more money. So that's what drew me to it. Was it about four or five times leverage? Well, it was futures contracts. Yeah. The margin requirement would be about 15, 20%. Yeah, and that would be a good gamble.
Right. All right, yeah. And what kind of contracts were you trading in the very beginning? Well, then it was commodities. Right. Okay. So then it was um everything from precious metals to cattle. Like I got really into grain and uh livestock and um you know, those types of commodities. So when I uh So my background I'll tell you.
You wanted a couple of stories so I'll give you the stories. So I did this and I went to college and then um what was it? The defining moment I learning experience was um I the year I graduated from college 1971, I clerked on the floor of the New York Stock Exchange. Mhm. And this is before I went to graduate school so it was in the summer.
Mhm. And on August 15th, 1971, President Nixon defaulted on his obligation, the US's obligation to give gold paper money. You know, back then gold was money. The paper money was like checks in a checkbook. Did he default or did he say that he will no longer back the dollar with gold? Uh I don't know the difference.
Right. The way you say it, there was a promise that you could convert in take $35, get an ounce of gold. Then he said, you can't take your $35 and get an ounce of gold. So that to me is a And that was because of Vietnam and going to the moon. Well, well, because we were spending a lot more. This is the thing through history.
Yeah. We always have to look at this. We'll get into this, I'm sure. But through history, that to the Old Testament and everything, the years of Jubilee and so on, it's when there is a lot of claims on money and there's not enough money in the bank. Mhm. Okay. And that's happened throughout history.
So we have a central bank that was that started 1913 and the idea was it had gold and there were many more claims on the gold than there was gold in the bank. Because for the same reason you borrow a lot of money. And when you borrow a lot of money, a lot more one man's debts are another man's assets.
So they're holding it expecting that they can get the money. And then they want the money, but there's not enough money. And that was the Federal Reserve Bank's problem in 1971. money, Rick? What is money? Money is Money is a medium of exchange and a store hold of wealth. Very important to to recognize it as a store hold of wealth.
What is a store hold of wealth? Okay. So when you and India many people realize that gold is a store hold of wealth. Mhm. Now, what we and then we it's the perception of money. Mhm. That it can be used as a medium of exchange that I can go around the world. Mhm. And I can go from one country to another and I can turn it in and get value to be able to buy things, right?
So that is what it is. Um and through history gold has been the most used money, most accepted around the world. Um you know, then what but it's the perception of it. And so when we think about let's say money as we commonly think about it, which is fiat money, then that But there's a difference there, right?
Like gold is an asset which is not a liability on anyone else's book. Exactly. It's a money. Mhm. It's the only money. Well, maybe it's a We could talk about crypto is crypto. But it yes, gold is the only money that you can have and nobody has to give you anything to have it. But the other money, all other money is dependent on somebody giving you something, okay?
Whether they give you and so it's unique in that it's confiscation risk is less than others. So that's why one of the reasons gold is unique. But it is also back to your main point main point. It is a widely recognized store hold of wealth that I could bring around the world and I could use it and it's particularly important and um that it is not deflate you can't deflate its value.
But you can't print it. You create more of it. And then it also in order to hold its I have a personal question here. I hold a lot of gold. I for a long time have kept 10% of my asset base in gold. Um The thing I wonder with gold is while it can't be replicated today. I mean there are people who are talking it about it as a byproduct of fusion and how they will create it like they did lab grown diamonds.
I I don't want to extrapolate that far. But with gold isn't it based on faith? Isn't it a bit like religion? Because gold inherently, I get that it's a great place to store value. But does gold have enough utility in isolation? I Money doesn't have much utility generally speaking, right? If you're carrying around cash, it's hard to paper.
It doesn't have much utility. So I don't think it's utility. I think you got to get out of the utility perspective of gold. Every Everything that's money could be a risk. Does it stay money? So for example, in the history of gold when there were great discoveries of gold, then the value of gold is affected by the quantity of those discoveries.
And if they could replicate gold or up like they've been replicating diamonds, then that becomes a risk of gold. So there are all risks to all money that are of the similar nature in terms of replicating the the supply of them or also the acceptance of them as a money. You know, they became gold fell out of fashion as a money and bonds fell into fashion.
But the historic thing to know is that throughout history there is always the temptation when when you there's a fiat money which easily could be produced and then there's the temptation of the interest rate. Mhm. Okay. Gold doesn't have an interest rate. Mhm. Okay, no interest rate. In India it does.
Oh, gold has an interest rate? Uh So India doesn't produce very much gold of our own. We end up importing a lot of the gold. So to be fiscally prudent, the government has this plan where if you buy sovereign gold bonds from the government Through gold bonds? Yeah, you get a you get a Bearing gold? Uh-huh.
But you're also able to monetize physical gold because you can lend it out for a certain percentage. Uh but you're still dealing with credit risk. Mhm. Mhm. Okay. Mhm. So what you're getting getting paid for is credit risk, right? So it's not gold. It's a promise to get your gold back. Mhm. Right? And that's what money was and that's why it would have an interest rate.
You have an interest rate that on the promise to get your gold back. That's what everybody believed and that's the great trick through history. The great trick is history and everybody believed it back then for a long time is if I hold the promise to get the gold then I will get an interest rate. And I could always turn my money in for gold.
So why won't I hold the promise to get the gold and get an interest rate on it rather than to hold the actual gold which wouldn't give me an interest rate. And that was the trap and that is always the trap. So when you look at it today, let's say and you you think, okay, I I think it's just arbitrage.
Um let's say I can hold gold that gives me no interest rate. I can hold Swiss francs which don't give me much interest rate. I can hold US dollars what which will give me depending on the maturity, but let's say will give me a 4% interest rate. My basic question is if gold goes up by more than 4% gold has to go up by more than 4% then I'm better holding gold.
And if it goes up by less than 4% then I'm better holding the bond. That that will operate. So I keep thinking about though you know, that question and the world keeps thinking about that question. Mhm. When I think of store of value, I also think of gold, money, US dollar, whatever currency be it. If I own equity in something very basic like a farm for example, which is producing a certain good, that makes it more fungible almost, right?
All assets Mhm. are valued as their appreciation in price and their yield. The yield that you're getting and the price change. And that's the total return. And so all assets you compare on that basis. If you're holding a farm Mhm. same deal. Okay. In other words, what is the yield on that farm from holding it?
Generally more than 4%? No, I'm not getting into the specifics. I'm getting into the mechanics. So we're looking at the markets as a whole. What I do is I just compare everything. Right. Okay. Because all I want to do is I want to essentially borrow or be short those that will have the lower returns relative to those that will have the higher returns.
So it's constantly calculations in that way however you get there. And that's true of your farm as it is on the other. Mhm. But I think that the farm or real estate assets should have to give me a higher return because I'm not going to have the choice of easily selling that farm and buying that farm.
Whereas that choice, that flexibility, that liquidity But we're talking about the public equity of a farm farming company. Okay. Then you are dealing with a public liquidity. I didn't know that I understood in terms of that. So then there's no liquidity premium. Still that same calculation. Okay. What is the yield and then what is the price change relative What is that?
That'll be my return. And what is that relative to the other things I can be in. And basically you start to think when you think of leverage, you start to think, okay, it doesn't have to be about zero. Zero means like no leverage. When you start to think, okay, I can be if if the lesser returning asset can become a liability Meaning I can then borrow it and get higher year then I want to get that spread and that's how I think of the issue of using leverage.
And then the issue is how do you deal with the risk? But the the risk is not something that is at like zero leverage and it's a black and white thing. It's a continuous thing. Well, I should say the following. There are two important ways to invest to invest. Okay? The first is what if you can't beat the market?
Mhm. Most people can't beat the market. So when they start off, everything isn't a bet. It's like if I don't know what to bet on, what is my portfolio? And so you should start with what is that mix of assets if you're not a trader and so on. Um what is the right mix? And that's for example why a lot of Indians hold gold.
There are a lot of people who hold gold. They don't want to bet, but they're just saying that'll be a store hold of wealth. Once you have that portfolio, that portfolio should be a well diversified portfolio that assumes you can't market time. Then there's the question, can you market time? Okay? Right.
So you're asking me a market timing question. I want to distinguish it. I don't think most people should play a market timing question. And when you're asking me my market timing, I view that question with a lot of responsibility, cuz maybe I'm right and maybe I'm wrong. I wanted to preface answering your question with that explanation, and then I'll go back to answering your question.
I money is debt and debt is money. What I mean money So here's mechanics. You're holding a debt instrument. What you're holding is a promise to deliver some money. And what that money's worth will determine what the value of what you're holding is, okay? You're really You're holding when they hold that debt.
You're holding money that if it's the value, you're going to be sorry, okay? And money is debt. And what I mean by that, when you're holding your money, you're holding it in a debt instrument. So money is debt and debt is money. And so now I'm when I'm answering your question, to me there's too much debt and we're producing it too much.
And so when I'm looking at that and I'm looking it around the world and I'm not just looking at it in the United States, I'm looking at it in the UK and in France and in China and in most countries, we're producing too much debt. That means I don't want that kind of money. So when because I don't want that kind of money, I look at Well, that's why I prefer and have been preferring the holding of gold to that kind of money.
I think when you think about your portfolio, you should start to think again if you don't have any What should you be holding? I think individuals or if you look at the quality of money and like gold, let's call it. You want to stay I would say I want to stay out of fiat currencies and I want to stay out of those things on a tactical bet, not on the strategic asset allocation bet.
When I do that, I think to myself what should I have and an individual and most investors should have between 5% and 15% of their portfolio in a gold or an alternative money. Now it depends what other assets they have in the portfolio. starting today to build a portfolio after the gold appreciation of the last year?
I think that they they have to stop even thinking about the appreciation and market timing as a starting point. You have to say, what amount am I going to hold? Mhm. Okay. What is that right amount? And it'll be So the answer to your question is yes. Forget about and we can get into the pricing of gold or what it might do and what it might not do, but still you're okay.
I need to hold that amount because that amount is the right amount. If you were to go through a portfolio optimization and you were to say, what through a mechanical portfolio optimization and you say, what is my mix of assets to create the right portfolio? If you're holding stocks and you're holding other assets, because gold gold is over a period of time a low returning asset class like cash.
It'll produce It has produced and for logical reasons it produces about a 1.2% a year real return. That's that's a low real return, but it is highly diversified because when the other parts of the portfolio do very badly, let's say, because of certain things like we're talking about stagflation, you print money and all that issues, then the gold does very well.
So it also has a diversification benefit in terms of the portfolio. For those reasons, it is the most fundamental money that we know of and it is at the same time an effective diversifier to other things. That'll get you to that 50 between 5% and 15% of the portfolio. While we're speaking about currency, how do you view crypto in the world of Bitcoin?
Um Bitcoin is limited in supply and its perception of money. It is a form of money. It's perceived as money as a store hold of wealth. That is unlikely to be significantly held by central banks and many others because of the number of problems it has. It can't transactions could all be followed in Bitcoin.
One can monitor what the transactions are. Governments can monitor what the transactions are. And governments can interfere with those transactions. Just like we talked about earlier when we talked about, you know, gold is the only asset that you can have that they can't mess with and control. You've got it, okay?
That's not true of Bitcoin. And then there are other issues of Bitcoin like if you we talked about the possibility would somebody make synthetic gold like they would make synthetic diamonds as a risk? Well, in terms of Bitcoin being cracked, broken, all sorts of things and controlled, it has those issues.
Okay. So that's how I look at Bitcoin. You're not bullish on it. I have a little No, no. I'm I'm bearish on fiat currencies. And bearish on So when I look at the world, I'm I'm just trying to say, then I say, what do I hold? Okay? So I hold a little bit of Bitcoin. I have a little bit of Bitcoin, but for me it's not as attractive as gold for the reasons you asked me my thoughts.
Those are my thoughts about Bitcoin. Mhm. A stable coin is attached to the fiat currency. So it goes down like the fiat currency goes down and it doesn't give an interest rate. And what they're toying around with what whether it gives interest rates or not, but there's not a model that I've seen. So so far, it's used largely for immediate quick transactions and not a store hold of wealth, but immediate quick transactions and it may be an efficient way to have that, but it's not my store hold of wealth yet.
I don't see the merit of it. So if I were to build your portfolio today of store hold of wealth, just that component, let's say if 5% to 15% goes to gold, how much goes to You said you have a little Bitcoin. What percentage would that be? I'm not going to give you what I've got, but I'll give you just general guidelines.
Um it depends on um the type of equities. You You can't talk about equities as equities Mhm. because they're too divergent. Mhm. As we're seeing for example now, it's so contrary the magnificent seven and and AI and tech is such a dominant thing. So in order to think about portfolio construction, you have to think what type of equities.
Where do you hold those equities? I'm not talking about equity. I'm talking about the assets that you hold with relatively lower risk like gold and treasury and Bitcoin, which is not you taking a bet on a particular industry, but some place to park money. What else do you have? I see. In other words, you're you're not asking whether there's equities in the portfolio or bonds or what country or anything like that.
You're just saying that piece of equities, okay? Then you think about that on that store hold of wealth, you start to think about what that nature of that thing is. There aren't many. Some might say there are gems. Some might say there are works of art. I mean, basically when they say these things, they're going through criteria which is can I move them around?
Are they store holds of wealth that are recognized in different places? They're not like real estate. Real estate is something that's nailed down in a location. It's easy to tax. It's not transferable and so on. So it's you know, those kinds of things. And Right. Do you think real estate should be taxed?
Like we have very low property taxes in India. I think what should be taxed I mean, like if I was to create a priority list, first tax this, last tax this and so on. And I would say in real estate, I think there's the question of what does it mean for the economy or what does it mean for those who are being taxed or what does it mean for those who are taxing.
I think the practical aspect of real estate in terms of taxing is because the individual owner of real estate can't take it with them. It is a very practical asset asset to tax for the government because they they can always tax that and you can't take it with you versus the other. So I think while you know, what should be taxed is dependent on who you're asking should it's for the government, it's a very effective thing to tax.
For an individual, Um, another. In terms of its economic um impact, I think it's fine to tax real estate. There's nothing You got to tax something. I I think no better do you want to have such a tax burden burden on any one thing that it's crushing to the economy. Then just generally taxes, I would say, you know, I want to spread them out and then I would tax things that are harmful.
You know, like um what I I don't know. I think all them sin taxes. Okay. If I don't know, maybe cigarettes or you know, um I don't know those things or and then some things that are harmful and you the least things you would tax are those things that are helpful. Yeah. I make a case for taxing real estate because I think a lot of the benefits of corruption and the bad money, the black money in a way sits in real estate and that might be a good way to bring it into the tax system.
Okay. Personally. If we go back to your life, you spoke about going to college after you began trading, after you were a caddy and after Do you think there are roles today like the role of a caddy where you work around influential people and you can learn by virtue of being in their proximity? It's always It's always of course great to be about around smart people.
If they don't want to be an entrepreneur, uh whatever it is, uh be around a smart entrepreneur and talk, you know, that's great, sure. What was caddy the job of a caddy back then? What do you think it would be today? Well, they do the same. They They carry bags or they put them on golf carts and but they walk there and if if you're walking with people or it's an entrepreneur, if you were a physicist and you're walking with a want to be a physicist and you're talking with a physicist Any suggestion of other jobs like the caddy job today?
Whatever gets whatever gets you two things I'd suggest. First, play the game. If you have an opportunity to play the game, you can play the game. With the one of the beauties of the markets is it doesn't take a big portfolio to play the game. At $50, I'd went into the game and I and because the market pieces can be broken up into small sizes, you can almost play the game the same as a huge investor can play the game.
Ease of access, you've got that in terms of those. So, the game that you get into at an early age will influence you a lot. If I look at like age 12, I'll give you that example. There's some people who say their psychologists will say, prior to 12, people learn differently. Um, because puberty at the age of puberty, prior to that, you learn.
If you're learning a language or learning a sport or learning to Anyway, the earlier you start learning, the better it is, the more internal learning that you're at. And so, play play the game, whatever it is. Bill Gates and a lot of the you know, key tech people like to play gaming. They were in gaming and they would hack the games and they would play in the computer and that'll affect them.
So, play the game, find a game that you love and ideally one that makes money. Wow, if you could do those two things together, that's a terrific thing. Play the game and then be around people who are pros at playing the game so you can chat about it. That's a good path. Leverage and speculation, especially around equity markets.
Across the world, many people seem to be coming down on qualify investor more before you allow him to speculate, buy futures or options. Um Do you think that should happen or should a young kid who's 18 and has that $50 be allowed to speculate? These are questions about I mean they're they're broader questions about um being taken advantage financially versus learning experiences.
I I don't mind any kind of risk something that becomes a tolerable amount of risk. That's different from exploitation. Okay? And so, um I think that it's incumbent should be incumbent on anybody who's selling any investment product to be dealing with it at a certain age to be thinking about am I exploiting that person or not?
Okay? So, that's But that's a balance for regulators to deal with. Right. Uh do you have a view on prediction markets? Like I know Shein I like them. I like them. Yeah. Yeah. Shein and Doty are friends of mine. They both live in New York. Call Shein Polymarket. Um In the future, does a lot of what is happening on stock markets move there?
Cuz you can speculate on just about anything. Mostly different act events to bet on. And I think events affect companies, but they're two different things. So, I would say it'll be something to speculate on. Um, but and it'll be something that smart people may use as a hedging device against owning an equity.
Like if this event happens, that event that you can speculate on and that might have an adverse effect to the stock I'm holding. There'll be all sorts of engineering and so on. I would imagine you'd see something like that happening. Um, but we'll see, you know. So, you would use it like a leading indicator to make stock decisions.
I'm not a leading indicator. I wouldn't view it as a leading indicator. I mean, you might think about it. It gives you information, but it's a vehicle to speculate. It's a vehicle to use to hedge. It gives you some notion of what those who are speculating on an is. There are certain things that I'd like to try to get across here in our interview that I'd like to You know, what what is the difference between wealth and money?
Um, there are certain things that if I can get across to your audience, I'd like to get across. Yeah. Do you want to go wealth and money first? Okay. Yeah. Bubbles and wealth and money. People are not used to dealing with the difference in them and it's very important. Wealth can easily be created. The way we account for wealth.
For example, if you're you start a company and let's say you want to make a unicorn. You sell $50 million worth of it. You value it at a billion dollars. You're now a billionaire and it counts in wealth as a billion dollars and there's but nobody would pay a billion dollars for that issue combined. Okay?
And that's a lot of what's happening now with wealth. And if you look at the 1920s bubbles or you look at those, what you see in one way or another is that wealth goes up and people feel wealthy, but their wealth isn't worth anything if you don't sell it, convert it into money to spend. Right? So, people should know that, okay?
That when they have this wealth, they perceive they had the wealth and so on. You it's not worth anything unless you can convert it into money and spend it other than its utilitarian value, but it's not worth what it what it is. And that's how bubbles are created, the mechanics of how that bubbles are created.
In one way or another, that happens. Okay? Then there comes along the need for money. So, what happened and how does that work? For one reason or another, somebody's got to get that money that money who and they have wealth, so they sell wealth in order to get money and then the bubble comes down. So, if you look at the 20s and and there or you look at any of the bubbles, the Japanese bubble or you look at the 2000 bubble and so on, you can see this dynamic because it can be created without money.
Money is the means that settles transactions. It's very different from credit. Okay? When you get credit to buy something, um you have an obligation to deliver money. But when you get money and you buy something, you have no obligation to deliver anything. You've paid for it. You've settled your transaction.
So now when I when we look at this, we have right now a very high ratio of wealth to money and this is particularly important now. Okay? And there's a and we have a very large also wealth gaps and values gaps. But when you have such a large wealth gap and and you have populism of the left and the right and so on and you have the notion of wealth taxes, you can have wealth tax as wealth taxes come in, what and the and the wealth is so large relative to the money, um if you're not taxing well wealth, then people can get very wealthy and no money can be raised for for the taxes.
So, there's a real pressure to tax wealth and if you tax wealth, then people have to sell in order to get the money to pay the taxes and that creates a dynamic that can pop a bubble. So, in my opinion, we're in a bubble, okay? By various measures of it being in a bubble and and people feeling very wealthy, but you have that vulnerability.
So, that is largely the dynamic of when we see these wealth booms and then the wealth bumps. I wanted to convey that, okay? So, that's the first thing I want to convey. Is there a way to calculate wealth to money ratio, which you said is Yes, I do. I do. Right. Wealth to money ratio right now in the United States is about 8 and 1/2 to 1, and and so on.
And when you look at it, um and then also then there's what it's in. The stock market uh um is is right now about 3 to 1. And uh and that's very high. If you were to go back to 1929 or 2000, it's at about the same level uh as it uh was in those times. Is it higher today than 2008 and 2000? Well, 2000 was the peak.
Mhm. How much was it? Uh same same as today. The sa- same uh same level. Not if you take 1929, 2000, and now, it's along right now if you look at that chart, you can you can see that chart. So, um we have a lot of wealth and a lot of equity wealth relative to money. Do you think it could be possible that tomorrow wealth tax is collected in equity and not money?
No. Because they have to spend it. And they have to pay it. In other words, the liability that it's going to fund can't be paid by I'm going to give you a piece of my farmland. You know, you get a piece of the farmland. The government gets a piece of the farmland. Yeah, that's what you're suggesting.
I don't think that's realistic. You get a piece of the farmland. Right. Okay, you're not going to feed people in inner cities with a piece of the farmland. Right. If that were to happen, people will have lesser incentive to work on the farm cuz eventually the government will own too much. think so. Um So, I wanted to talk about the five big forces that that drive things, yeah, if I can.
Um First, there is a debt money economy markets dynamic. Credit creates buying, but it creates debt. And when it had creates debt, there's an obligation to pay back. And then the and and so how that dynamic works. The second big force happens simultaneously is the internal political force. You experience it in India.
Every country does. We experience here. There's an element here of that political force that there's left and right. In other words, the rich and the poor. And the conflict and how to run a country and so on. So, that political force and there's a cycle just as there's a debt cycle. That means that you cannot increase your debt past a certain point, and that changes.
That monetary order cycle lasts something like a lifetime. Um and and that that's the debt cycle. There is a political cycle that goes with that that has the left and the right. And the political And we are in the middle of that. So, the nature of our governance system and the nature of democracy at the risk of do you we're past the point of um saying that we'll abide by the rules.
Okay? It's a it When you have populism on both sides, it's a win-at-all-costs type of uh approach. Will you accept election results? Can you Can the government compromise? Can it govern in that way? That political cycle is number two, and it matters a lot. The All these cycles relate to each other. Number three is the geopolitical order, the world order.
In other words, we came out of 1945. You come out of the You end a war, and then the dominant powers at the time determine how the world order works. How who has what power, what the rules are. That was dominated by the United States because of the power it had. And then you have changes in relative power.
The emergence of China, the um relative decline of the United States, India's role, and other places' role. That world order has changed. That world order's gone from a world order that it was a multilateral world order, sort of with rules like the United Nations and the World Trade Organization and the World uh Health Organization and the World This is, you know, the World Bank and the World This and the World That in terms of multilateral governance, and that is over, okay?
So, we no longer have that kind of a world order. We have a world order which is dominated by um power, power struggles, and as we deal with that. So, those three cycles, that money cycle, that debt money cycle, that internal order and disorder cycle, that international world order cycle, they tend to coincide and throughout history.
When you have that that convergence, you almost have a perfect storm of that. The fourth influence through time has been climate. Um acts of nature, droughts, floods, and pandemics have killed more people than wars and changed more orders. And number five, always through history, is man's inventedness, particularly of new technologies.
So, everything that we're we would ever talk about in the markets, in the economy, will fall under those things, practically everything. And it's the interrelationship of those things and the arc through history that one needs to see in order to understand what's going on. So, my basic view is that there are many things that happen over and over through history that haven't happened in our lifetimes that are very educational, very valuable in being making decisions.
I'm going to ask you a question, Ray. How does a youngster, this is a very candid, pragmatic question. How does a youngster in India who's 25 years old, say his name is Nikhil and he's living in India in Bombay, uh how does he make money using all this information and framework? Cuz that's his objective.
Play the game. How do I use this information to play the game better? I I think I think there's cerebral learning and there's visceral learning, you know? And um so, I can tell we can talk like this, but we are it's a different thing. Once you start to get into playing the game, whatever the game is, little entrepreneur on um street corner selling something, okay?
That's You play the money game. Right. Okay? Whatever way you play the money game, maybe it's in the public markets, maybe it's in you buy a little piece of real estate, or you have a hot dog stand. I don't know what it is, but you play the game. And as you start to play the game, you'll start to learn the fundamentals of the game.
You And we talked about this. Be around people who also uh play the game. So, while you're playing it, and you will learn through your experiences and your reflections and the help of other people. I think everybody wants to play the game and they are tempting to play the game, but what will be really cool is if we can get an insight from you of how to play the game.
Like if I were to be looking to begin today, should I look at is value in public markets, in private markets? Should I be I I I think it's more like the opposite. What happens is you find your thing. Mhm. Okay? There are many different games If you look around you, there are many different games. You know, it's um I have my grandchildren um sell um hot cider in the winter in a park, and then what and then they understand capital formation.
I have to buy the the the flask, I have to buy the table. Okay, that's capital formation. Then they understand when they go out that, okay, if I can uh produce it, what's my incremental cost and unit cost for producing it relative to I I can sell it at this, I have a margin of this. Then they understand margin, and then they understand that they make money when that overcomes their capital cost.
Okay? They're playing the game, they start to think about that way. Then they start speaking with others. Gee, can I Where can I get the cider cheaper or whatever and and so on. So, there are all these games around you, okay? And start to play. Then you'll ask the questions. Then you'll dig and so on.
Or Yeah, you can find somebody will help you. And they might say, "Hey, here's this little job that you can do." Whatever it is, it is that little germination that then creates um mul- empires. That That That's the process of going from wherever you are in India to or wherever you are from me caddying on a golf course in the United States.
That's the process that allows that to grow and develop over a period of time. It's very helpful to understand your nature. Okay? People have different pulls. Some people are more risk-averse. Some people like to pay attention to the big picture. Others will handle risk. Others will pay attention to the details.
What is your nature? So, I created online I'm It's free online a a test called PrinciplesYou. I recommend you take it, everybody take it. And they'll look at you, and through answering questions, you'll learn about yourself. And if you also have other people that you know you have relationships, you'll look at them to help to identify their nature.
What is their inclinations? And I think that what what really is the journey in life is to try to know about your nature and find it connection to the right path, right? So there are many right paths. For all your audience, I want you to know your nature and try to match it up with what the right path is for you.
Um for the trader in me, uh if I were to go back in time and be 18 years old again, if I were to specifically ask you, you you model people a lot in the sense that you psychoanalyze them, you let you have them go through different kind of testing to figure out what psychology is suited to what. What works for a trader, Ray?
What makes a trader successful? There are many what what one When you use the word trader, it has an implication of a certain way of operating that may that is only a small percentage of the total way of investing, right? So it's the person who um the the it could be buys this from here and sells it from here.
It could be the form of, you know, you buy a bracelet here and you sell a bracelet here and you do it or it could be a stock trader and so on and so forth. And that implies like buy, sell and so on. There are many other ways. I think you have to if you're understanding, let's say, investing, then you have to understand the various ways of converting one thing to another thing and making a profit.
And that's why I give the example of the cider cases and so on for being able to do that. A trader, I'd say think biases it too much to the guy who's flipping. But I think for this example, let's say, what is the archetype of a trader but investor that would help him succeed psychologically? First, you're going to go into it and you're going to get hooked on it like getting hooked on a game.
Okay? And you're not going to know anything. And then through those experiences, what you need to do is be curious to understand mechanics. Okay? What are the cause-effect relationships? What are the things that make the market go up or down so that you can and whatever it is, whether you're a day trader or whether you're investor, you have to get into the mechanics and you have to learn the mechanics, right?
And through that experience and you if you think and you're curious and you can research, then you can do that. I am creating a platform that anybody can use to help them do that. In other words, there's information. And the way you make decisions is your brain brings in information and it puts it through criteria that determine action.
Okay? That's how the brain works. That's all the decisions. And so you have to learn what are what is the criteria that are And the criteria is cause-effect relationships because causes happen before effects. And if you understand cause-effect relationships and you understand the causes, you can bet on the effects that it will be have happening from that.
So you have to be curious and you have to be analytical to understand those cause-effect relationships. You begin a journey, okay? Because if you're just gambling and you don't understand the cause, you won't have an edge. You need to have an edge, okay? And that is by knowing those cause-effect relationships and playing your bet and how to organize your bets so that there's a diversified group of bets because the power of diversification means that you can greatly reduce risk without reducing returns.
Right. What else do we have? Curiosity, understanding cause-effect relationship, then? And being addicted to the game and getting the best guidance you can get. Right. How does one get guidance? All guidance is all around you. I'm part of the guidance here today. There are courses you can take, okay?
Once you have the curiosity, then you will dig in and you will learn and you will experiment. Is that what worked for you, Ray? You still you still come across as a very curious person. It almost feels like you're trying to answer the question of life Yeah. that can't be answered in a way. I'm learning more every day.
Right. And I can't answer it all or understand it all. Um but I I understand a lot more and I get a kick out of it. You know, um Albert Einstein supposedly on his deathbed was still trying to figure out problems. Um I can imagine me doing that because I love the problems and like to learn, you know?
Um so yes, I have uh that addiction to learning and and then one of the great things about this game is you bet on it and you get a score. So you you can measure my performance down to three decimal places and so on, don't you? Has this taken a lot of time, changing world order, the research, the amount of effort that
Yes, but it's a passion. Right. What do you hope to achieve at the other end? For me, now? Yeah. My main thing is can I pass it along? I got a journey. And I learn and I love it and and all of that that So it's still a passion. But what I'm really also trying to do as I approach this stage in life is to pass along.
I think there are three stages for me. There are three stages in life. There's the first stage where you're dependent on others and you're learning. You go to school, you're not really doing it. You're just learning, right? And and you have that dependency. Second stage is you begin the second phase of life.
Very different stage is you're working and you're trying to be successful and others become dependent on you. Mhm. And in that phase, you're dealing with the real world in terms of being able to do it. It's no longer academic. And then you and you have your career. And I started Bridgewater, um largest hedge fund in the world.
I started uh the two-bedroom apartment. I ran it for 50 years and I'm then I passed it along. Okay, wow, what a great journey and I learned a lot, okay? But now I'm at a phase in my life where what I want to do, I'm in the transition to my third phase. And this in this transition, I think that there's an instinctual uh desire to pass along what you've learned, to mentor.
Why am I doing your show? Okay, because I have that desire. So that's what's important to me. And why do you have that desire? I'm just asking you for it's instinctual and it's intellectual. It's instinctual almost um we learn uh you know, man's subliminal understanding goes back millions of years even though man only was 250,000 years old and so on because of what becomes Why do we love our raise our children?
Why do we do many things? It's There's a lot of subliminal things that enter into why we do things. And and then there's and it's intellectual. What do I want to do? It's the most valuable thing I can do. Um karma, okay? Karma, what goes around comes around. In other words, that notion. That So I I believe it, I feel it and I want to do that.
So it's both intellectual and emotional. You've spoken about karma and meditation and does that play a role in your investor career? It makes you a better investor? a it's a These are dominant things. Meditation has been the biggest source of success that I um have. It's given me an equanimity. It's given me um when you transcend, I do transcendental meditation.
That's my When you transcend, you're going into your subconscious. And as you go into your subconscious, it helps you align your subconscious with your conscious. It brings back a creativity. It brings back a flow because like creativity, if you go take a hot shower and you you relax and so on, ideas can come to you much better perhaps than if you try to muscle them out.
So meditation has played an important role. And then karma, I I believe in the the reality is is that um by people mutually helping each other or and not just people but operating in a way that's also helpful to nature and the world, that there is this greater there's this greater good. And that one happens is it's very functional because a a little things that won't take much for me to help somebody else can make a life difference to them.
And then they when they do something, whether it's to me or whether others, you create environment like that, you create a better environment. So not only is it practical, it also has the effect of creating this wonderful environment. You look at studies of history and you find in studies of history uh what brings about happiness and health past a certain amount of money uh basic subsistence life, there's no correlation between the amount of money you have and the amount of health happiness you have.
Um the greatest source of health happiness, excuse me, across societies is community. If you have a good community and that's that's a source of helping it and well-being. So, I think that these are laws of nature and they're just reality when I look at them that way. So, yes, your your question was does meditation and karma play a role?
It plays a role in everything. Yeah. You spoke about community. Are you spending time in Abu Dhabi, for example? Um How do you find that place culturally? Oh, I love it. I Yeah? Uh I I uh I started going there uh 32 years ago um because their large wealth fund uh hired me and hired Bridgewater as an an investment.
I think that they understand karma. Um what each society has may call it different things and so on, but they understand um most important things um and I'll and I'll to create a a a successful society. What it is required to to create a successful society is basically three things. If you do this well, then you are in a successful society.
The first is teach your children, educate your children well, so that they are capable of uh succeeding, earning money, and so on, and living life, and also that that uh they're civil. They understand civility. Have them come out to a civil society in which people work well together to make good things happen.
And stay out of wars. Stay out of a domestic war and stay out of an international war. If you do those three things well, you will have a successful society. Okay? So, now if when I look at the the places, you could almost look at that. Is is there harmony? Is there Do you educate the children well and and do you have broad-based prosperity?
In other words, that it works well for most people. Right? These are These are fundamentals. And so, um in the Gulf countries, uh particularly Abu Dhabi or the UAE and Saudi Arabia and so on, even there's a Bedouin culture and so on that has elements uh a lot of elements in in those things. It exists in other places.
In in various places, success is their version of it. If you go to um Asia and and you go to Singapore, you go to China, they do it in their Confucian way, okay? In terms of harmony. How do you do harmony or what is common prosperity? How do I um make it that most people are benefiting? And that if you look at the accomplishments within India in terms of the development.
And and so when I say that civility, certain basics. Do you earn more than you spend? Do you have a good income statement and a good balance sheet? Okay? And these are basics. You have these basics, you will have a successful if not I'm not saying not challenging, but you'll have a successful life and you'll have a successful society.
You've had a very eclectic experience in terms of China, Russia, Abu Dhabi, Saudi. Uh How are they like? How are these people to talk to? Uh can you tell us something about them? Well, the best uh um the best leaders are reflective. They go above it. It being how the world evolves, where they are in the cycles.
They understand human nature. And they care deeply about uh the well-being of their people. And they're practical. That those are the you know, the characteristics. So, we have conversations that are quite like this. And then you get into this particular like what to do, you know? Uh you know, how do you deal with the conflict?
Okay? So, there's a conflict. And like a a general rule, um be neutral. Okay? Cuz if you look at the history of wars and so on, there are in winners of the wars, losers of the wars, and neutral country countries. The winners of the wars lose. Meaning, they still get deeper in debt and they have the consequences of the wars.
The losers of the wars get wiped out. They lose everything. And the neutral countries prosper from the wars. Even that's how they accumulate money and they don't have that problem. And so it's it's always better to operate that way. Now, if you look at history and you then say we apply it today. Um okay.
So, the conversations are like that. You've liked China for many years. I think one of your kids went to live in China. How do you see the global dynamic playing out between China, America, Russia? Maybe you can opine on India as well. What do you think will happen next? Now, we have the changing world order.
The United States and other countries have a different mentality about fighting and so on and so forth. There may be that dynamic. So, now you have a the change power matters. Power in all of this. Not it's not the rules of the game. It's not etiquette. It is power matters. And that is the dynamic that we have.
What's most important is how healthy the country is, each country. More important than the international way. If you're strong, you're strong. And that's the most So, be strong and healthy. And so, there uh the United States is going through its challenges. We we talked about that. We could talk about that more.
And then the and then uh China is going through its challenges and India is going through its challenges. But how it goes through those challenges to do the things that I just said are effective to make an effective country is the most important thing. So, I don't think we're going to There is a greater risk that we can have um I'll say military war.
We're certainly in the classic wars that happened before military war. We're in a trade war. We're in a technology war. We're in a geopolitical influence war. All of those are in that and that's the dynamic that's happening. If you're asking me uh what it means, I think that it's probably that they're not it's lower risk of, you know, a big It can happen.
You have to be careful. But um I think then it's how each country takes care of their own and becomes strong and healthy that matters most. And how do you think the dynamics between them will change? If I were to get more specific as a proportion of world trade, who will do better? Will it be 10 years forward, will it be China or the US?
I think when we look how does India fit into this? What can we do better? Um I think the technology war is the most important war that almost whoever wins the technology war will win almost everything. I think that right now you have a situation where they recognize that the each side can do harm to them and actually is using techniques.
And so, there we're now in a period of time of inter eliminate or reduce interdependencies. That there's a list that both countries or all countries are going on and they say, "How can I squeeze the other? What dependency do they have that I can use to squeeze the other? Or what dependency do I have that might be used against me to create squeezes?" And that's in capital as well as trade and so on.
So, everybody's now going to kind of this independence and you know, minimizing interdependence because that's the smart thing to do whatever because I will be squeezed if I can be it'll be used against me. So, that's where we are on that. And then compete to become most effective, most powerful, most rich, most powerful.
They're both doing that. And technology will be important. So, I think that over those periods of time, you're going to see um that dynamic. Um I think China uh they're ahead and behind in different ways. Um for example, the inventiveness of new chips um and the most advanced chips, um the United States is a bit ahead is is ahead.
Um and then uh but the application to use the chips, whatever AI there is, to be able to integrate it into life and making it for the society most applications and most effective, China's ahead. I think that um India is um at a wonderful um arc in terms of um its circumstances, its potential, and and what and what it's developing.
And I think that um uh President Modi is very much like uh Deng Xiaoping for China. Um and and what I mean by that is that um he's creating changes. And when you are have a country that um can build its infrastructure and can build on that so that you and you don't have much debt and you have a large talented population in many ways that for these reasons I have I've created as indicators leading indicators of what countries have their ingredients to project the next 10 years growth rate India is best India's going to have probably the as the best fundamentals to have the best growth rate in that because you're going from not having enough money to having for that has infrastructure you have to build infrastructure when you're building infrastructure when you're creating the the things that happen in India not only all the different infrastructure including the ability to get credit and the ability to do transactions and so on in that that produces a growth curve particularly if you don't have very much debt and you have talented people so I for those reasons I think India over the next 10 years has all the ingredients to really be the strongest growth rate and improvement however it's it still has development to do it is more akin to where China was you know 30 years ago maybe than where China is today so it has that that growth it the actual power of it is not as great as the those other two countries I'm going to ask you the last question of today if you were 25 years old and in India and you had either $100 to if you had $100 to invest somewhere where would you put the money the first thing I would do is ask myself what do I need most to be most successful and I would secure that right it's not just return on investment does that mean that I can take a little bit of that $100 and I could start my little business or do I secure that $100 to have my education that I'm being able to operate whatever is going to as a young person invest in their own success to be able to learn do I how do I learn do I listen to your podcast what is it that is going to allow me as a young person to be able to invest in myself and learn and get better so that's the most important thing that's the best investment I can make super any last words for our audience no just thank you I would say if you are interested in staying in touch you can do that online um through LinkedIn and various media and it's my pleasure thank you thank them to be able to communicate this way I hope it's of some use thank you really I hope you come visit India someday sir I would look forward to it thank you so much
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