Transcription
Hello, today we have a special appointment to interview Dr. Supavud Saicheua, advisor to the Kiatnakin Phatra Financial Business Group. It's a good timing, as we scheduled with the professor since last week. We really want the professor to help analyze the investment market a bit. Especially since the professor is particularly knowledgeable in monetary policy and fiscal policy, and is also an expert in international economics. And in fact, the professor is also knowledgeable in geopolitics. I actually spoke with the professor and said, "Professor, I'd like you to analyze what's happening in the global stock market right now because there's been a sell-off. And before this, the US government bond yields were extremely high. Prices have adjusted downwards, there's been a sell-off. What's important is that we're approaching the US Federal Reserve's meeting on June 16-17, so I'd like the professor to analyze it. Coincidentally, today there's been a huge off, a global stock market sell-off. It really started last Friday, June 5th, and continued until today, Monday, June 8th. The Asian market has been sold off, Europe too. What does this signal, especially regarding AI stocks? Is it their time to have a bubble burst, or is the bubble leaking? And how dangerous will it be for our investments? Today, the professor will analyze and scan everything for us, the various factors that are risks and opportunities for our investments. We are now with Professor Supavud. Professor, hello. >> Hello, Professor. Hello. >> Professor, I'd like to ask a bit because today we've seen the stock market really start since Friday. This morning in Asia, it's also plummeted, heavily sold off. It's been up for 9 consecutive weeks. Professor, do you see this as a normal sell-off, or is it the beginning of a point where we need to question the current capital? Will there be a movement after we see the situation in the Middle East and the very high rise in AI stock prices? Are there any specific points to be cautious about? >> Are there specific points to be cautious about? No, it's just that many things have happened simultaneously, making me think it's a point where we need to sit and think carefully. It's not just short-term profit-taking, and then it will go back up to new record highs within 2-3 weeks, right? Everyone thinks so. Fear of missing out, right? >> Yes. >> Uh, we need to save time. When stocks go down a bit, we need to save. I suspect, and I might be wrong, I suspect it's not that anymore because there are many factors that, when combined, >> Uh-huh. >> Uh, we need to think carefully that going forward, the situation will not be as conducive to risky assets as it has been in the past. >> Uh-huh. That means risky assets will be more dangerous now, especially AI stocks too, right, Professor? Because they've run up. Do you think they've run up too much beyond profits, or is there something that's pulling them down? >> AI doesn't have profits yet, does it? >> It doesn't have them yet, Professor. >> As for the part about AI, it doesn't have profits yet, does it? Meaning, when we talk about AI, >> When we talk about AI, we mean AI that will make us work better, more effectively, until our salaries increase, until our productivity increases. I ask everyone listening, including myself, does AI help me in my work? Yes, it makes it easier for me to find information. As far as I can observe now, AI is like an employee who works without complaining, 24 hours a day. But has my salary increased yet? >> I don't know if yours has increased your salary yet, or your profits. >> It increases our work speed, Professor. >> Yes, but has the company's revenue increased yet? >> It hasn't come from AI yet, Professor. >> Right? That's it. For everyone, I understand it's close to that. AI seems good, it helps us work, makes us work harder, faster, much more, right? But has our salary increased yet? Mine hasn't. >> Uh-huh. >> And has the general public's performance increased? Has output increased? I haven't seen it yet. >> Yes. >> What we see now is that there's an accelerated investment to create AI output. To put it simply, it's like making AI even smarter. >> Uh-huh. >> That is, building data centers, hyper-scalers, installing this and that equipment, hard drives, doing many things to make AI smarter. And hoping that we will be willing to pay tokens to buy AI to work with, and make our productivity better. But this period is the build-up of AI. >> Which is why we see them setting up data centers in Thailand to get a lot of data so that AI becomes smarter, because the more data it gets, the smarter it becomes. But has it made us smarter yet? Has it increased our salaries yet? >> Uh-huh. >> So, we are buying the future, hoping that in the future it will make the economy boom because of AI. If I were to compare AI, I would compare AI to when England built railways over 100 years ago. They were building them rapidly, building many railways because they thought railways would be a transportation system changer. Those who invested in building railways didn't make any profit. >> Uh-huh. >> But in the end, were the railways beneficial? Very beneficial. >> Uh-huh. >> AI is currently like building railways. >> Uh-huh. So, we have to look long-term, right, Professor? >> It's like this. The problem will be like this. If you look at today's numbers, you'll see that the US economy's numbers look very good. Non-farm payrolls, right? It improved in May, and the April numbers were revised up, and the March numbers were revised up. So, the average non-farm payroll, or agricultural employment, has increased by about 180,000 positions on average over 3 months. >> Yes. >> Therefore, the US economy is hot, right? Because the US economy only needs to create 120,000-150,000 jobs per month. Creating more than that means the economy is overheating. >> Uh-huh. >> This indicates that AI is drawing resources for an AI boom. It's drawing everything, including the labor market. >> Uh-huh. >> And it's draining all the money, right? SpaceX IPO, it will IPO soon. Google will release many bonds soon. It's draining money from both the capital and money markets, but it's also causing a boom in America. Now, when you boom like this, the Fed cannot lower short-term interest rates because the economy is booming. >> Uh-huh. >> But worse, long-term interest rates are rising for two reasons. First, the Suez Canal is not open yet. Oil prices have risen by 30-40% and are stuck there, causing costs to rise for everything, whether it's oil, natural gas, or eventually food, because fertilizer is insufficient, which will further increase inflation. Second, the US government, according to private sector calculations, has already spent about 100 billion dollars on the war in Iran, averaging a billion dollars a day. This increases the US government's debt. The more debt there is, the more bonds are issued. The more bonds are issued, the higher the yields. We've seen US bond yields rise to 4.5%, 5%. These three factors are factors that make risky assets riskier. >> Uh-huh. >> Yes, risky assets are riskier. >> Uh-huh. >> Um, because first, the US economy is hot. If it's this hot, the Fed cannot lower short-term interest rates. Second, inflation may persist, forcing long-term interest rates to rise. Third, the US government is overspending. So, the yield curve is steepening across the board. Short-term might rise more than long-term, but the steeper the yield curve, the more difficult it is for risky assets. Because for risky assets, we compare between buying US government bonds with less risk, or buying AI stocks with a PE of 30 times. >> Uh-huh. >> And the risk is almost the same. >> Uh-huh. Is this one reason, Professor, that last week, when the May employment numbers came out at 10,000, the market plummeted? Does this mean this is what investors fear regarding the valuation of AI stocks, combined with the Iran issue? That the Iran issue isn't ending and is dragging on, not ending, but dragging on even longer. The Iran issue is very scary, that it's dragging on longer than before. Trump can't control it. >> Trump can't control it at all. >> Uh-huh. >> I think investors, I read investor comments every beginning of the week, and they say the Iran issue will end soon, it will end soon, it will end soon, for 4 weeks now, right? This is worse because this morning, even though Trump told Netanyahu, the Prime Minister of Israel, not to attack Iran back, he attacked anyway. This morning, Tehran was hit, and two other cities were hit. >> Uh-huh. >> So, the issue is expanding further, and Trump can't control it. When Trump can't control it, it opens up loopholes. When loopholes are opened, the issue will be a long-term problem. >> Uh-huh. Professor, investors shouldn't overlook the Middle East war, right? Because right now, it seems like money is pouring into AI groups, chip groups, technology groups. All AI infrastructure. Everyone says it's like it's already happened, they're not interested in the Middle East war anymore. Actually, there's a connection, right, Professor? You mentioned that AI needs to build data centers, right? >> Yes. >> Data centers need electricity. Where does electricity come from? >> The biggest source now is oil, right, Professor? Fossil fuels. >> Natural gas. >> Yes, right? Or if you're lucky, solar. But solar prices are also starting to rise. So, how can you ignore it? I can't imagine, because now you, the AI people, are using enormous amounts of energy, draining energy from elsewhere. Even in foreign countries, data centers are being opposed in many states because you're making electricity prices more expensive for the public. >> Uh-huh. >> And you're going to say that you can separate your AI world from the energy price world? I can't imagine. >> Yes. Professor, as you mentioned earlier, the US numbers are still strong, and on the other hand, US inflation numbers have risen for two consecutive months, from 3.3 to 3.8. It's strange. We'll have to wait and see what happens next month. Now, it turns out that the meeting on the 16th and 17th will be with the new Mr. Kevin Wachs. Professor, what are your thoughts on this new person? Will he continue with a low-interest rate policy, or do you think interest rates might surprise and even signal an increase? What are your thoughts? >> It's like this. If anyone has followed the US inflation numbers closely, they will see that the Federal Reserve started losing control of inflation even before Trump attacked Iran. Because in the past 4-5 months before February, >> Uh-huh. >> Both headline CPI, Core CPI, PCE Core, and Headline PCE have stopped declining and even show a tendency to rise, even before February of this year. After that, of course, it went up even more. But there were signs from the beginning that inflation was chronic, and they couldn't control it at around 3-something percent, right? Or close to it, around 3%. If Core PCE is slightly lower, maybe 2.8%, but it's significantly above the Federal Reserve's target of 2%. Now, with rising energy prices and the prolonged situation, and second, the US economy being stronger than expected, as I mentioned earlier. If I were Kevin Wachs, I'd be tired now. Because Kevin Wachs thinks this: he thinks AI will be very beneficial in stimulating US productivity to rise significantly, so that in the long run, America will grow more without high inflation, because productivity increases. But my problem is that during the period when you're building up AI, building railways, there are no trains running yet. You're building data centers, hyper-scalers, cloud services, investing enormously. In the next 1-2 years, productivity won't come yet, but you're accelerating the competition for resources, causing inflation to rise first. >> Uh-huh. >> So, for Kevin Wachs, it will be very difficult to lower interest rates. If anything, he might have to raise interest rates. >> Uh-huh. >> There's another point that many people don't consider. We've already said that inflation will rise because of energy. Inflation will rise because AI is accelerating the competition for resources. Inflation will rise because the US economy is stronger than expected from the beginning. >> Uh-huh. >> But there's another point: if Kevin Wachs doesn't raise short-term interest rates to show discipline from the American central bank, >> Uh-huh. >> The market will think you can't control inflation. If you can't control inflation, the market will adjust the risk for long-term interest rates, meaning they will increase the term premium on long-term interest rates, causing long-term interest rates to spike further. >> Uh-huh. >> Long-term interest rates will rise. Do you understand? If you don't raise short-term interest rates, >> Until the market is confident, they will raise long-term interest rates instead. There's a risk that the yield curve will steepen more than expected. If that happens, and US government bond yields rise to 5% or more, it makes me wonder why I should invest in stocks when I can get 5% by depositing money or buying US government bonds. >> Uh-huh. >> This is what I think makes Kevin Wachs even more frightening, even more frightening. >> Uh-huh. >> Don't think that you will only control short-term interest rates by looking at the US economy. But you have to consider that the market will use your stance to calculate the price of long-term government bonds, meaning the calculation of long-term US interest rates. I think what's difficult for Kevin Wachs will be this issue, which will make things even more difficult. Kevin Wachs said he will reform the Federal Reserve. >> Uh-huh. >> And one thing he disagrees with the Federal Reserve on two points. First, he says your simulation models are very poor, and he will redo them. Your models are poor, and he will redo them. Second, he dislikes forward guidance. Don't tell the market. >> Uh-huh. >> If you say it, it's wrong, and it leads the market in the wrong direction, following us too much. If he does both of these things as he said, first, rewriting all the models will take time. >> Yes. >> If there's no forward guidance, we'll be even more blind. >> Lost. >> Now, now it won't be easy, because this is the period when we ourselves are less likely to know where everything is going, and yet you're closing this communication channel. And you're also saying that the Fed's model is poor and unusable. I read what he wrote, it's along those lines. >> Uh-huh. >> Right? >> It will make it even more difficult for us. Uncertainty will increase even further. >> Yes. Professor, as you said, if long-term interest rates rise because the market thinks the Fed can't control it, is this a reflection of that situation, Professor? Because the 30-year yield has risen to 5%, and the 10-year is around 4.5-5%. Is this already accounting for this situation, as you've observed? >> Oh, no one knows. No one knows. >> Uh-huh. >> Okay, let's stick to theory first. Let's stick to theory, because in the end, we have to rely on theory. >> Long-term interest rates depend on, I think, three parts. First, >> Uh-huh. >> It depends on the fundamental economic factors. >> The faster the economy grows, the higher the interest rates, because do you understand? Economic growth means the return on being in this economy. Suppose the economy grows by 2%. >> Interest rates must be at least 2%. The interest rate that reflects fundamental factors. Okay, in the case of America, the Federal Reserve estimates that the economy will grow by 1.8%. >> Yes. >> But many people are forecasting that AI will make the economy grow much more than that, much more. Suppose AI is truly brilliant and makes the US economy grow by 2.5%. So, from the RAR perspective, it must be pushed up from before. This is the first point. Second, what is the steady-state inflation? How much inflation can the Federal Reserve control? Suppose it can control it at 2%. Plus, it becomes 4.5-5% already, right? >> Yes. >> Not including the last part, which is the term premium. That is, when we hold any bond, the longer it is, the riskier it is, and the more premium we need. This means, as you mentioned earlier, holding a 10-year bond at 4.5-5%, I accept it, but for a 30-year bond, I want 5%. >> Uh-huh. >> Even though it's the US government. >> Yes. >> Right? And if you're very confident, why don't you hold a 30-year bond and get 5% per year, while you only get 4.5-5% per year? Do you understand? This is the term premium. These three factors, if anything, are all rising. >> Uh-huh. >> Right? In the past, the term premium was negative. It's difficult to calculate the term premium. It's called the residual. Originally, the term premium was 0. But now it seems it might not be 0 anymore. For example, these three things. >> Yes. >> These three things. Originally, the Federal Reserve calculated, to make it easy to understand, the authorities thought the real interest rate was only half a percent. And inflation was around 2%. So, adding these two together, 2.5%. And if there's a small term premium, it was only, I remember at that time, US government bonds before COVID, they only yielded, on average, 2.2-2.3%. At that time, the term premium was even negative if calculated quickly. But today, at 4.5-5%, I'm not sure if it's enough because you still don't know how much more GDP AI will make grow, how much more inflation will rise, whether the Federal Reserve can control inflation, and the term premium. Will Trump have fiscal discipline? He has no fiscal discipline at all. >> Because the deficit is 8% of GDP annually. >> Yes. >> These three factors, it seems they are all rising. I don't know if the US 4.5-5% for 10 years or 5% for 30 years is correct. But if I had to guess, I think both of these plus another 50 basis points wouldn't be surprising. That is, 10 years at >> Uh-huh. >> 5%, and 30 years at 5.5%. I wouldn't be surprised given these three conditions. >> Uh-huh. Professor, as we know, we've always understood that America has a capitalist system. They use money in the future, like credit card spending or refinancing. If they can't control it and have to raise interest rates, Professor, based on government bond yields, how will it affect things, especially the government's own debt, government debt refinancing, or the public's debt? How much will it increase? This is not even talking about stocks like Tesla, Professor. How will Tesla be valued? >> Um, Ms. Na, let's just say this. I think we tend to think they can control their own lives, and it has global implications. It might be the other way around. >> Yes. >> Right now, America relies on foreign countries more than we generally think. >> Uh-huh. >> Right? America is like this now. America is overspending, as seen from the current account deficit of about 3-something percent of GDP annually. 3-something percent of GDP. GDP is about 30 trillion US dollars. So, it's almost a trillion dollars that they are overspending. >> Yes. >> Now, what is this overspending used for? In the recent period, I think the overspending is in two parts: first, overspending by the government. >> And the other part is overspending on investing in AI. >> Uh-huh. >> Right? We invest in AI. We say, "Wow, Alphabet stock is so good, this stock is so good." You like it so much. We go there, we buy American assets. We have capital inflow, money flowing into America. The latest net capital inflow I've seen is about 4% of GDP. 4% of GDP net. Because there's a net, meaning America also invests abroad, but the net inflow is 4% of GDP. These are quick numbers, but they are old numbers. >> Uh-huh. So, in reality, they rely on our money for their overspending. They rely on our money for us to help them raise funds to build AI. So, it depends on whether they do a bad job and our money doesn't come in because we don't want it anymore. It affects them too. So, it's not that they are the only ones leading. It's a two-way street. Everything can happen in two ways. >> Um, the most frightening thing is likely the issue of foreigners having to buy US government bonds. >> Uh-huh. >> And foreigners who buy US government bonds, originally, foreigners held US government bonds as a proportion, about 15-20 years ago. >> Yes. >> We foreigners loved US government bonds so much. >> Right? So, all US government bonds, back then, if I remember correctly, around 2010, there were about 10 trillion US dollars. America had very little debt. We, foreign countries, bought US bonds for 4.4 trillion dollars, or 47%. We thought, "Wow, US bonds are excellent," and we rushed to buy them. Who are we? Mostly central banks. Central banks. Today, US debt instruments have ballooned from 9 trillion dollars to about 28 trillion dollars. And it turns out we can't buy anymore. The proportion we buy is only 33%, or about 10 million, leaving about 9 trillion dollars. >> Uh-huh. >> And this, our share, our central bank share, has decreased. Instead, we have mutual funds, various funds buying them. And what's strange and bad is that funds that set up branches in the Cayman Islands also buy US government bonds, but they are classified as foreign, even though they are American. And this proportion is also in the trillions of dollars. >> Uh-huh. >> What does this mean? It means that in the end, those who hold them and are stable are central banks, and their share has decreased. Those who buy and sell will increase. >> This means that soon, you'll see that bond yields will fluctuate much more violently and won't be as stable as before. This will be a source of volatility, causing problems for the US economy and the global economy. >> Uh-huh. Professor, regarding the rise in interest rates, it reflects that we may not have cheap capital anymore. But the first stage of investment, I understand that the hyperscaler or AI groups are trying to use their own capital, working capital, because those groups still have profits. Now, when it comes to this stage, they may have to rely on external funding. Like recently, SpaceX and OpenAI, etc., are entering the capital market. And soon, they may have to borrow. Will this be a point, Professor, where we can observe that AI stocks, which have risen like a mountain, might start to gradually decline significantly? Will this happen due to higher capital costs? Can we observe this, Professor? >> Oh, it's not just that. Because, I think, Ms. Na, you mentioned that originally, they financed their investments with cash flow, right? With working capital, with net cash flow, right? But now they're starting to raise more funds. This is draining liquidity from the capital market, right? >> Yes, Professor. >> But later, it will be even more so. Because now, Alphabet, Google, are accelerating bond issuance. Meta is also issuing bonds, draining liquidity from the debt market as well. It's draining from both sides, and it will drain a lot because everyone is trying to compete, right? Competing to gain an advantage in building hyper-scalers before others. So, there will be problems on both sides. >> Oh, if something happens that's like a trigger, Professor, that makes the investments not go as investors expect, it could have a significant impact, right, Professor, on the capital market? Some people are afraid it might spill over into the private market, right, Ms. Na? >> Yes, yes, Professor. >> Private markets are not very transparent. And if something happens there, it can be risky. That might be the thing that shocks everyone without anyone knowing. >> Uh-huh. But this time, Professor, do you think it's different? AI versus .com? People try to separate them, saying that wasn't real, but this time it's real, it's changing the world. Do you see it as different, from the perspective of an economist looking at productivity output for the economy? >> Uh, this is like common wisdom, right? It's the shared understanding of everyone. Oh, during the dot-com era, we were all so foolish, calculating P/E ratios, right? And during dot-com, no one... we say that. >> Uh, if you're interested, please look at the Financial Times. There's an article by Luigi Zingales, who says that's not true. He went back and looked at the numbers. He went back and looked at the numbers. >> During that time, it wasn't that bad. >> Uh-huh. >> It wasn't that bad. Um, let me tell you a bit because this person I know personally. When I worked at Phatra, this person was like the CIO of Morgan Stanley Asset Management. I met him often, and I knew he was very knowledgeable because he actually managed Morgan Stanley's funds. Now he's the manager of the Rockefeller Foundation, I believe. He said that when you think there were no profits back then, he said that's not true. If you go back and look at the numbers carefully, you'll see that's not the case. During that period, corporate earnings growth for listed companies from 1995-99 averaged 11%. >> Uh-huh. >> During 2015, it rose to 15%, which is higher, but 11% is not bad. 11% is not bad. And he said the tech sector back then, during the bubble period, 1995-99, averaged 20% growth. >> Uh-huh. 20% growth. During the late 90s, Intel, Microsoft, Qualcomm, Oracle, during this period. >> Uh-huh. >> During that time, those companies, which are still around, had earnings of about 30-something percent. Not bad. Max 7, Nvidia are very high, but Apple is only 17% in the recent period. So, on average, it's not that different. Don't say it's different. That's the first point. Second, the market looks good today because of the private market. >> Uh-huh. >> This private market has many companies that are self-sustaining outside the market. For example, Antropic now, right? >> Yes. >> It's self-sustaining outside the market. Before, this market wasn't this big. Notice that Antropic is still losing money. SpaceX is still losing money, right? But when it starts to look good, they go for an IPO. On average, companies in the market today are doing better than last time because last time there was no private market to sustain companies when they were losing money until they started looking good and went into the market. This is the second argument. The third interesting argument is about a research paper called "Financialization: How Fiscal Policy Has Inflated Profits and Equity Valuations." This is research published in the Journal of Economic Literature. Those who are not economists might not know that the Journal of Economic Literature is not a trivial journal. It's very good. Rarely does it analyze topics related to financial markets. But it's interesting that this article, dated November 2025, >> It concludes that the growth in US corporate profits recently is due to the large US government budget deficit, as money flows into US companies, increasing their profits. They provide data for anyone to see. For example, they say they estimate that during the period around 1996-21, which is 5 years during the bubble, the US government's budget deficit, which was small then, contributed 25% to US corporate profits. But today, according to their data for 2020-24, the US government has a large budget deficit. They calculate that 55% of US corporate profits come from the US government's budget deficit. What does this mean? It means that whenever the US government has to return to fiscal discipline and reduce its budget deficit, corporate profits will fall. This is based on three points: that you shouldn't think it's better now because of these three factors. >> Uh-huh. It's just that this time, Professor, isn't it bigger than the dot-com bubble? The money that's going in. >> It's vastly larger. Because now, the proportion of Max 7, I've also looked at the numbers, the proportion of Max 7 is incredibly large, frighteningly large, not unbelievable. Frighteningly large. Max 7 now. >> Yes. >> The revenue of Max 7 is calculated at about 7.6% of US GDP. Very large. >> Uh, and it could go up to about 10-12% if our forecasts reach that point. If it really reaches that point within, say, 3-4 years, which will be enormous. >> Uh, it has been this high before. It was the US oil companies like XOM, BP, Chevron, ConocoPhillips, etc. They were this high. But those oil companies buy and sell, so their gross revenue is high because their costs are also high. So, their margins are low, only a few percent. But Max 7 has very high margins. So, there's a real risk that these companies will become even bigger. And in the past in America, if a company became too big, they ordered it to be broken up because they didn't want any company to be too big. So, it's also a risk for Max 7 that if they become too big, they will be regulated. >> Yes. >> To prevent them from being monopolized. >> Professor, you mentioned this point. I'd like to ask for your knowledge, because we see even the stock market in South Korea today, it plummeted by over 4% because before that, there were stocks like Samsung and SK Hynix, which, simply put, their market capitalization dominated the market. These two stocks rose like Delta, or even Japan has similar situations. And as you mentioned, the tech stocks in America also have a high proportion. So, if AI, as a new technology, as you've estimated, new technology can truly change the world, but its stock price might reflect exaggerated expectations. In the case of AI today, if it bursts, will it affect the global economy? Because it supports the economy with its performance, and its market capitalization supports the stock market, and it reflects the economy of that country. Is it scary, Professor, for each country? >> Earlier, Ms. Na mentioned SK Hynix, right? That it rose a lot. >> And other stocks that I've observed rising a lot are selling to AI, right? >> Yes. >> Selling chips, right? >> Yes. >> And we also sell PCB, right? These are the ones that are just building AI, right? This is making AI bigger, right? >> Yes. >> But the question earlier was, after they build AI bigger, can we truly benefit from it? As I asked, has your salary increased? Has my salary increased? Because AI has been around for 2-3 years, and mine hasn't increased yet. But has it made my work easier? More work? Faster work? Yes, but I haven't been able to monetize it yet. And if we can't monetize it, and they invest so much, and it doesn't come, it doesn't come as expected. Do you understand? If we can't generate revenue, we won't be able to pay tokens. >> Uh-huh. >> And what they predicted and the dreams they created for us might not come true, right? >> Uh-huh. >> And that will have an impact. It will lead to a revaluation for everyone, for America, for South Korea, for Japan, right? SoftBank, with so much capital, might also be affected. But right now, SoftBank's stock is rising very well, for example. Take SpaceX, Ms. Na. Why did you invest in its IPO? Because you think it will build data centers in space? >> Yes, yes, in space. >> And is it cheap? It must be expensive. >> Uh-huh. >> It must be expensive. Now, if it's expensive, and they build it, and make data centers, and make data smarter with AI, but we're not willing to pay for AI. Do you pay a lot for ChatGPT? >> Uh-huh. >> I think not much. Or for ChatGPT, we pay around 1,000-2,000 each. >> Yes. >> 3,000, right? >> Yes. >> It might not be, it might not yield as expected, because we're not willing to pay much. Because we haven't earned much yet. We're playing with ChatGPT, and our salaries haven't increased. >> That's more important. Okay, that's B2C. But what about B2B? Various businesses. Have they used it and truly revolutionized their businesses? We haven't seen prominent user cases yet, where, "Wow, after using AI, they've surpassed others, and their productivity has improved so much." No one has answered that question yet. But everyone says, "Okay, I will AI." Do you understand? Everyone says, "I will AI," but I haven't seen that using AI has made my results so good. And if we haven't seen it yet, how can we dare to believe that the massive investments being made will yield the expected returns? We have to wait 2-3 years.
It might become like Fiber Optics, where everything drops a lot, exceeding expectations because everyone is competing. They are competing to produce AI, and then there will be excess capacity. When this happens, prices will fall, and many will suffer.
Yes, Professor. On the contrary, because now all the companies are reducing staff.
Yes.
This causes consumption of...
Uh, humans, humans have to consume. They have to buy AI, pay AI. But humans, when they have no income, economic activity shrinks, right, Professor? Or will it inflate or grow in other economic sectors instead, specifically for those involved with AI?
I understand. If AI is truly good, truly good, it must make me much more productive, so much so that my salary increases significantly. And when my salary increases, I will spend on this and that. And then I will create jobs for others too, right? I might become so rich that I can hire many people, or I might start a company because my performance is so good that I need more people to join. That is possible. But it hasn't happened yet. It hasn't happened yet. To see AI make people look like us talking, it's useless. On the contrary, it's even harmful. People don't look at the negative side. For example, do you remember the story of Mithril?
Uh-huh.
The story of Mithril, which Anthropic released, saying it was very good at discovering your cybersecurity weaknesses.
Yes.
Right?
They released that it was very good. They released it to only the first 100, oh, sorry, only the first 50 companies closest to them as partners.
Now, the US government was shocked that this Mithril is truly good. It can find our weaknesses very well. The US government said, "We need to control it." Right? Most recently, Mithril said, "Okay, we probably need to increase it. Let's give it to another 150 partner companies to use." Because it's so good. Okay, what does that mean? It means that in reality, they know that competitors will also produce Mithril, similar to Mithril, and will compete for the market. Others will do it. China will do it.
Now, if these things are produced, this is not more productive. You make us even more afraid of our cybersecurity. And will this lead to reduced productivity, not increased productivity, really? And the US cannot control technology. No one can control it because there is no system for overseeing technology collaboratively. In the past, there was cooperation between all countries in the world. Nowadays, Trump has destroyed everything we had, good relationships between cooperation, whether it's the WHO, whether it's climate change. Trump let everything become unregulated. And if you have this, everyone will rush to make Mithril.
Uh-huh.
China will make it. Russia will make it. Maybe even North Korea will make it.
Instead of the productivity of...
Uh, countries, various countries increasing, AI is causing us to have increased costs.
There's another side to it as well.
Uh-huh.
So I'm not sure if productivity increases on one side from AI.
Uh, but it's scary, Professor. Because with Mithril, they said humans have never seen these vulnerabilities before, but this AI finds them all. Professor, it might be able to penetrate systems that humans couldn't find for 20 years. This AI can find them. Professor, I don't know. They say Bitcoin is scary now. It might be hacked. All the coins might be taken.
Yes, if that's the case, then my question is, if so, why do you think AI will only have positive aspects?
Uh-huh.
Right? If there are negative aspects and it increases costs for companies to defend themselves, to improve their defenses, isn't that a cost?
Uh-huh.
Yes, Professor. I have a question. Because now, AI, everything is AI, AI, AI. It's all over the world, in terms of investment, capital markets, business, various investments. If, as you said, we have to wait another 2-3 years, and if in these 2-3 years, what is inflated deflates, will it affect the global economy?
It will affect it. What will deflate is because the US government is so heavily in debt that they issue bonds and no one buys them. Bond yields skyrocket, the economy plummets. And when funding costs rise like this, you will soon encounter problems in the private market. There will be problems, and it will spread everywhere, causing financial shocks everywhere. Yes, but do you realize it's like a chain? People are like a chain. The global economy is like a chain. The chain will break at its weakest link, and we don't know which link it is. We suspect it might be the private market, right? We don't know. Truly, those who are skilled, you need to look at where the financial fragility, or the vulnerability of the global financial system, lies.
Uh, but the biggest concentration is in America, right, Professor? Private market.
Well, we don't know. We really don't know where it will crack. We don't know. For example, do you remember that incident where something collapsed because of speculation on Russian debt instruments? Do you remember that? We really don't know where it will crack. We really don't know.
Uh, but it will be in things that are very risky, with high leverage, such as hedge funds that do what is called basis trading, buying and selling US debt instruments. That's possible.
Uh-huh.
So, we really don't know. I admit that this will be homework. I'll look into where it's risky. But right now, I can't think that far. I can't think that far.
Yes, Professor. But, wow, AI is truly here. It's truly changing the world. But you said in the next 2-3 years, we might have to wait and see. But we don't want to miss the boat, Professor. We want to ride the wave. But from your perspective as an economist, Professor, what criteria should investors use to invest in AI stocks, to select AI stocks? Are they still worth investing in? Should we look at actual profits? Economists will look at the output, market dominance, low debt, strong cash flow, clear customers, and changes in structure.
Oh, I don't have knowledge in this area. But clear profits are impossible in principle because you are buying the future. So, clear profits, don't even talk about it. You only need to talk about future profits, right?
Future profits mean taking risks. You have to guess that what they are investing in is correct. You have only a few major players to choose from. You don't have to guess. You have to evaluate whose strategy is more accurate, more correct. Whether it's Meta, okay, is their strategy correct? Compared to Google, compared to Alphabet, compared to Apple, like this. You have to sit and think, or compare with Nvidia. You don't have to think for yourself. I admit I can't answer this. I myself still don't have an answer. I don't have an answer at all.
Yes.
Uh, uh, uh, I'll go back to another aspect. Everything you all are talking about, like what you're discussing, requires energy, right? You need energy. And that fossil fuel energy is being threatened by Iran, right? The question is, what other energy sources are there? Okay, it's probably solar, but solar panels are massively overproduced to the point where there are no profits at all. So it comes back to batteries. And who knows, maybe batteries will be the biggest thing. It turns out that energy storage, whether it's storing energy in data centers, or storing energy in EVs, or storing energy in our cell phones, whoever can do this, I think they will make a lot of profit, right? I won't think like AI. I won't, I'll take something simpler than AI. I'll just take batteries.
For me, it seems more interesting.
Then we have to go to China, Professor. They are good at batteries.
Uh, batteries now are lithium-ion batteries, right? But if batteries are going to evolve into something world-changing, it must become what is called Solid State batteries. Batteries that don't use liquid.
Uh.
And they will be lighter, store more power, and shouldn't explode like they do now because they won't overheat. For me, these basics are interesting. Interesting. You have AI, I don't mind. But I can guess that your AI will need all of these things because your AI, if you don't want to be criticized by the public for taking their electricity, you must use solar. Solar, and then you need battery storage.
Uh, it's easy to understand, tangible, Professor. It's clear. We don't have to ask who will...
Commercially viable solid-state battery first.
Yes.
Uh.
Yes, Professor. Listening to you, AI, like when we interviewed Professor Niwet, he said he can't predict the future of AI more than 50%. So he said he'd rather not invest because it's a field where he might lose. So he doesn't invest. Or even wars, we don't know how they will end. In this case, Professor, what asset do you think this year, what asset can we survive with the most? What seems safest? Because bond prices are very volatile, as you analyzed. Stocks, oh my, we don't know when they will crash again. What about gold?
You said, you said even gold is failing, right?
Yes, Professor. What should we do? This is it.
It's difficult. It's difficult. I have to admit it's difficult. I have to admit that I don't have an answer for you. I don't have an answer. Today, we want to discuss two things: AI and interest rates. One seems like, wow, everyone is rushing in until it's overvalued. Are we looking at it too positively? The other is that we haven't deeply considered the risks of interest rates. We never thought, "Wow, it will suddenly rise." And it is rising. So, in this situation, it seems like you might need high liquidity and wait to collect later, right?
Uh-huh.
Rather than rushing in, like fear of missing out. Not, "Wow, stocks dropped 5%, let's go in and buy because they will go up 10%." That's probably not it. But as for which sector, I admit I don't know and I don't dare to give advice. And I don't have the opportunity or the right to give advice.
Uh-huh. Professor, a moment ago, at the start of the program, you mentioned the risk in the Middle East. You said the United States might be able to control Iran, right? Professor, do you think there is still hope for negotiations? Because wars must be negotiated, and they don't end. They will drag on like this if they can't negotiate.
The problem is that Iran thinks the longer it drags on, the more benefit Iran gets. Right now, Iran thinks the longer it drags on, the more benefit Iran gets. Even though Iran itself is in great difficulty because America is blocking Iran from exporting oil. But I suspect they can send it overland in small amounts, but they do send it.
I suspect they have their ways of finding things. But the important thing is they think they have America under control. The longer they wait, the more advantage they get. I must briefly explain the current situation. Israel attacked Iran back after Iran attacked Israel last Sunday. Iran fired rockets into Israel, which is a violation of the ceasefire agreement. But Iran did that because Israel was going to attack Hezbollah in Lebanon. Israel, Iran said to stop, but they didn't stop. So Iran escalated and attacked Israel directly.
Yes.
Attacked directly. Immediately, Trump called the Prime Minister and said, "Hey, don't attack Iran back, because you won't be able to handle it. The situation will get worse." Netanyahu didn't listen. This morning, the Israeli military fired rockets into Iran. Iran said, "Okay, we'll go all out today."
Uh-huh.
So it's not decreasing, it's increasing. Why is that? Because I suspect, as I said, I suspect Iran thinks that the longer it takes, Iran thinks Trump will not be able to tolerate it and will yield to Iran. So, let's get back to the core of the negotiation. Where is the core of the negotiation now? The core of the negotiation now is that America has agreed to Iran to divide the negotiation into two phases. The first phase is America stopping sanctions on Iran, and Iran will open the strait. What America, what Trump wants is for the strait to be open so that oil prices will fall, and Americans won't complain about high oil prices. But before agreeing to this, there are two conditions. First, the condition that Iran strongly desires is the $24 billion in Iranian funds that America seized. Iran must get at least half back as a down payment to show sincerity. $12 billion must come first. Iran must get $12 billion first.
It's $24 billion, right? The second phase will be negotiations primarily on nuclear weapons. There might be issues with missiles and other things. But nuclear weapons, the condition will be similar to, okay, the enriched uranium might be transferred to a third country. The uranium that can be used for enrichment, Iran insists on its right to do so, but might agree to temporarily stop enrichment. The third is about inspections. They must be able to inspect at any time without prior notice. But these three points must be negotiated further, after the strait is opened, after America returns the money, $10,000, $24,000, and then negotiate further. These are the conditions Trump must swallow to open the strait. But think about it, if the conditions are like this.
Yes.
And after the strait is opened, Trump has to remove all warships from the strait and go home. Do you think Iran will agree to negotiate an end to the nuclear issue quickly? They won't end it quickly. They will drag it out because when they negotiated the JCPOA with Obama, it took about 2 years.
Uh-huh.
If it drags on, Trump faces the midterm elections. Oh, if I were a Democrat, I would campaign that Trump spent hundreds of billions of dollars, Americans lost about hundreds of billions of dollars, 14 American soldiers died, and the strait was already open and remained open. But they still couldn't agree on nuclear weapons.
Trump is finished.
Uh, wow. This is...
Yes, Trump is finished.
Uh-huh. So, this means Iran will likely drag it out for a long time, right? If Mr. Trump doesn't accept it.
It seems like, it seems like it's not that Trump doesn't accept it.
Trump wants it so badly, he wants it so much. But the problem is this, this $12 billion. Imagine, if I were a Democrat, I would campaign that during Obama's time, negotiations with Iran led to the cessation of nuclear enrichment for 15 years. During Trump's time, he had to pay $12 billion and it's not even finished.
His approval rating will drop.
It's over. There's nothing left. And don't even mention the $100 billion that was just spent, the soldiers who just died, Americans facing gasoline prices of $5 per gallon. It's over. I can easily campaign for the Democrats, right?
AI can help make it happen, for sure. It can happen today, this evening.
Uh-huh.
If it ends like this, if the agreement ends like this, wow, I can campaign this evening. Professor, if this is the case, it will definitely not end quickly. If we listen to this.
We don't know. Maybe Iran will be lucky and can't stand it because of the sanctions. We really don't know. We really don't know, because Iran is also suffering heavily. It's not that they aren't suffering heavily.
Yes.
Yes.
But if it's an invasion, a land invasion by America, we don't even need to think about that. The United States is unlikely to do it because the damage would be too severe, right, Professor? The population...
Their population is 92 million. How many soldiers would you need to control their country?
It's huge. The area is also large, Professor.
Yes, 92 million people.
Uh-huh.
Yes.
Yes.
I understand, Professor.
Listening to your analysis, the picture is clear. The situation is like a frog in boiling water, Professor. We'll see when the water boils. Right now, the entire Middle East is in it, and America is likely included, right, Professor?
Iran is included. Everyone is included. Today, listening to you, we see two situations. As you analyzed, we listened about AI, and then it led to interest rates, and the Middle East. It also leads to interest rates because it's the center of inflation, as you said. This time, it will be a heavy burden for Mr. Kevin Warsh, whether he can make the market believe that he is controlling inflation. And what will be the direction of interest rates? Will they rise or stay the same? But falling will be difficult, right, Professor? Today, thank you very much, Professor. It's very solid information, Professor. It's very beneficial for investors, Professor. Thank you very much, Professor. Thank you, Professor. Goodbye.
Thank you. You're welcome.
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