Transcription
So Ray, we have a long program of events coming up through the course of this week and Abu Dhabi is going to be bringing in something like $63 trillion worth of asset managers through the course of this week as well. So a lot to keep in focus but key on the agenda this week is AI and this is one of your five forces that you like to talk about. So I want your take on what's happening with the AI trade right now as well. You have said that we are in bubble territory but investors should not sell. Can you expand on that for me?
Well, I I think there's the investor perspective and then there's the user perspective, right? I think it's important to distinguish the fact that this technology will have without a doubt revolutionarily beneficial impacts. That has nothing to do with a bubble. Okay? All the bubbles took place in times of great technological change. Lot of money going in. It's never done precisely. It's either going to be too much or too little to make the profits. And then there's just this up this big up and down. Uh a bubble is a set of circumstances where for uh various reasons um the buying and the selling are unsustainable. Those who buy for their various reasons whether there's debt in there and all of that and then there's the pricking of a bubble. Okay, very important to make a difference uh to understand the difference. So at a as a bubble is arising you don't want to get out of it just because the bubble you want to look for the prickling of the bubble the pricking and that usually has to do with the tightening of money whatever the force is um you have to realize that wealth is different from money um in in a bubble there it's very easy to create wealth you know like nowadays you can uh raise $50 million for a valuation of a billion dollars you are now a billionaire and that's worth a billion dollars on paper, but it doesn't mean you can sell that. And so when you get into a situation where the wealth has to be sold to raise money, typically maybe for debt service payments, but things like wealth taxes, can you imagine if a wealth tax came over? Uh then you would have that kind of dynamic. So the uh we're not going to have a tightening of monetary policy soon and and so in fact an easing. So you start to see these cracks. We're seeing cracks in the markets in a number of ways. Private equity, venture capital, debt that's being revol uh uh refinanced and all of those. So we are in a bubble I believe by almost all of those measures. um not the most extreme bubbles, quite similar to 2000, um but not at the same level, not the same level as the 1929 bubble, but we are in that bubble. And then the question is when does the bubble get pricricked? Because wealth has to be sold to come up with the money to deliver it for whatever it's needed.
>> Not just when the bubble might be pricricked, but what will it be pricricked by? You've outlined some concerns. What would you say is the biggest risk right now to the momentum that we're seeing in the AI trade?
>> Well, you're going to you're seeing cracks in venture capital, uh, private equity, real estate. You're seeing that um interest rates uh on locked in debt are now not not going to exist. In other words, debt is now maturing and that means that it has to be rolled forward and that'll be rolled forward at higher interest rates. So that's going to create a cash flow for a number of entities in those areas that they are also the owners of money that's going in there. I don't think we're going to have a tightening of monetary policy immediately. And so that'll be neutral. And and then I think the the real interesting question is a wealth tax question because uh the wealth uh the wealthy are getting much more wealthier. But at the same time as that wealth is not taxed and there's a lot more talk about that at the state level or at the U uh federal level less. So um these are the signs the early signs of needing perhaps to sell wealth to deal with some of those expenses. We also have a very concentrated market right the on around AI around a limited number of uh shares um and we also with these uh wealth gaps we have a lot of the political problems as we go into the 2026 elections it's likely that the Republicans can lose the house and so on you will see a lot more conflict in diff in different ways and also that we have the higher interest rates So the future, if I was to say the next u year or two in the future is going to be more precarious.
>> Ray, if you were running Bridgewater today, how exposed would you be to some of these AI mega cap names?
>> Well, I I um you have to bet on that. I I would bet also more on the usage of it. In other words, uh there's the uh hyperscalers and so on. But the greatest impact is going to come from the users of it. So those who have the platforms for enabling or those who actually use it to change their cost uh and their effectiveness will be the real beneficiaries. They're not expensive like that. Uh but I also uh know that I have to have diversification. diversification is very much uh important and in we're right now in this situation where so much is concentrated on so few and so that is a particular problem so I'd be much more diversified I would do deal with that impact I would also deal with the issue of money so when you ask how I would be positioned I think the real question is what is the value of money and and the value of money is the reciprocal of the value of debt. In other words, debt is a promise to uh pay money. So, you're holding a debt asset. Those are going to give money. We have a problem. We don't have enough money. We're in a situation where uh for combination of budget deficits around the world, military expenses, other expenses, social expenses have created a dynamic. So, that I'm anti I I worry about debt. Okay? I worry about the issues of debt. That means that I want um I don't fiat money. I'm concerned about fiat money. That means that I also would be positioned in not fiat money, gold positions and so on. So that that would give you a flavor of the mix of markets that I'm in and uh would