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LARGELY SHRUGGING OFF THE LATEST U.S. IRAN STRIKES. BROADER INDICES RALLYING AND OIL PRICES ARE DOWN. OUR NEXT GUEST SAYS THE MARKETS ARE RIGHT TO IGNORE SOME OF THESE RENEWED TENSIONS. JOINING US THIS MORNING IS ROCKEFELLER INTERNATIONAL CHAIRMAN RUCHIR SHARMA, WITH SOME UPDATED THOUGHTS ON WHERE WE STAND RIGHT NOW.
RUCHIR I GUESS WE'RE GOING BACK TO THE GEOPOLITICS HAVE RARELY BEEN A DRIVING FORCE FOR VERY LONG.
>> EXACTLY. SO I THINK THAT THIS WAS THE DISCUSSION WE HAD EVEN BACK IN MARCH, THAT GEOPOLITICAL CONFLICTS VERY RARELY HAVE A LASTING IMPACT ON MARKETS. TYPICALLY, THE MARKET DECLINES FOR ABOUT A MONTH AND THEN RECOVERS EVERYTHING. AND THAT'S THE SAME PATTERN WHICH HAS PLAYED OUT NOW. AND I THINK IT'S ALSO VERY INTERESTING ABOUT HOW OIL PRICES HAVE BEHAVED. I THINK A LOT OF US, SCAREMONGERS AND OIL HAVE BEEN DOING THE MIR CULPAS OVER THE LAST FEW WEEKS, SAYING THAT WHY THEY'RE VERY DIRE FORECASTS ON OIL DID NOT COME THROUGH, EVEN THOUGH THERE WAS A BIG SUPPLY SHOCK. AND IT'S JUST THE WAY THE WORLD ECONOMY HAS CHANGED. IT'S MUCH LESS DEPENDENT ON ENERGY AND OIL, AND ALSO THAT IT WAS ABLE TO NAVIGATE THIS CRISIS BY FIGHT, BY BOTH FINDING ALTERNATIVE ROUTES FOR SUPPLY AND ALSO BY BEING ABLE TO CURB DEMAND PRETTY EFFECTIVELY, ESPECIALLY IN PLACES LIKE ASIA. SO THAT'S THE DYNAMISM THAT WE HAVE SEEN. BUT NET NET, I THINK GEOPOLITICAL EVENTS ARE SOMETHING WHICH ARE USUALLY OVERRATED. AND THAT'S ONCE AGAIN, THE MARKETS HAVE PLAYED THAT OUT.
>> YES. WE'VE TALKED ABOUT THE CHINA BUYERS STRIKE AND WE HAVE WORKED OUR WAY THROUGH SOME RESERVES. I MEAN TO BE FAIR. AND THAT'S HAPPENED ALL AROUND THE WORLD. I AM REALLY INTERESTED, THOUGH, IN YOUR VIEW, THAT MAYBE IT'S LONGER TERM RATES THAT POSE THE BIGGEST THREAT TO EITHER THE TECH TRADE OR MARKETS OVERALL.
>> YEAH. SO, YOU KNOW, WE LOOKED AT THIS A LOT, CARL, AS YOU KNOW, THAT I'VE BEEN STUDYING BUBBLES AND WE LOOKED AT BUBBLES OVER THE LAST 300 YEARS. AND IF YOU LOOK AT WHAT'S HAPPENING ON THE AI SPACE JUST NOW, IT PRETTY MUCH CHECKS ALL THE CLASSIC BUBBLE SIGNS. WE DISCUSSED THE 400 FRAMEWORK THAT I'VE HAD ABOUT OVER INVESTMENT, OVER LEVERAGE, OVER OWNERSHIP THAT WE HAVE SPOKEN ABOUT, ALONG WITH OVER TRADING AS WELL. AND I THINK THAT IT CHECKS THAT. BUT WHAT I THINK THAT WE ALSO KNOW FROM BUBBLES IS THAT THEY DO NOT FALL UNDER THEIR OWN WEIGHT. IT IS ALWAYS HIGHER INTEREST RATES, WHICH END BIG BUBBLES. AND I THINK THAT UNTIL WE GET HIGHER INTEREST RATES, THIS BUBBLE WILL KEEP INFLATING. AND THAT'S BEEN WHAT'S GOING ON THIS YEAR. SO UNTIL I THINK THE TEN YEAR REACHES 5% OR THE FED IS FINALLY FORCED TO CONFRONT THE FACT THAT IT'S BEEN MISSING ITS INFLATION TARGET FOR SO LONG. UNTIL THEN, IT'S HARD TO CALL AN END TO THIS BUBBLE. AND IT KEEPS INFLATING.
TILL THEN, WHICH HERE COMPANIES ARE TAKING ADVANTAGE OF WHAT MANY ARE CALLING A VERY ACTIVE DEBT MARKET. AMAZON WITH THAT $25 BILLION DEBT RAISE, NVIDIA, SPACEX, AMONG OTHERS. I WONDER WHAT YOU MAKE OF THESE DEBT RAISES. AND SOME COMPANIES ALSO ISSUING STOCK TO FUND THE AI BUILD OUT. IS THAT, IN A WAY, A CHARACTERISTIC OF A POTENTIAL AI BUBBLE?
>> YEAH. NO, I THINK THAT WE ARE IN A BUBBLE. SO I THINK THAT THAT FOR ME IS THAT THE FRAMEWORK PRETTY MUCH ALIGNS WITH THAT. BUT AT WHAT STAGE OF THE BUBBLE WE ARE, BECAUSE AS YOU KNOW, THAT THE LAST STAGE OF A BUBBLE OFTEN TENDS TO BE WHERE YOU GET A LOT OF VERY CLIMACTIC PRICE ACTION, PRICES GO PARABOLIC. AND THAT'S WHAT WE'VE SEEN IN THE SEMICONDUCTOR SPACE AS WELL. SO THE HALLMARKS OF A BUBBLE ARE CLEARLY THERE. THE ISSUE IS HOW LONG DOES IT LAST. AND WHAT I'M SAYING IS THAT TIMING THESE THINGS IS VERY DIFFICULT. BUT UNTIL YOU GET HIGHER INTEREST RATES, YOU'RE GOING TO KEEP SEEING PRICES GO HIGHER. SO I THINK THAT'S THE BASIC MACRO FRAMEWORK. BUT OTHERWISE, ALL THE SIGNS THAT YOU'RE POINTING OUT TO ONLY CONFIRM THE FACT THAT WE ARE IN SOME SORT OF A BUBBLE, BUT THERE IS NO SCIENTIFIC DEFINITION OF A BUBBLE. THESE ARE, YOU KNOW, CHECKS THAT WE CAN LOOK AT SIGNS FRO