WEBVTT - Surveillance: Evergrande 'Manageable,' Dalio Says 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:09.240 --> 0:00:12.719 with Jonathan Farrell and Lisa Brown Witz Jay Ley. We 0:00:12.880 --> 0:00:16.800 bring you insight from the best and economics, finance, investment, 0:00:17.079 --> 0:00:22.440 and international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, 0:00:22.840 --> 0:00:26.280 Bloomberg dot Com and of course on the Bloomberg Termainment. 0:00:28.880 --> 0:00:32.400 Really timely conversation always with Ray Dalio, but with what's 0:00:32.440 --> 0:00:35.239 going on, and we'll finish strong with China here in 0:00:35.320 --> 0:00:38.880 a moment. This is really really timely for Global Wall Street. 0:00:38.920 --> 0:00:41.159 We will come all of you on Bloomberg Television and 0:00:41.200 --> 0:00:43.800 I'm Bloomberg Radio. John Farrell mentions ever Grand there is 0:00:43.840 --> 0:00:47.120 Bridgewater up to their eyeballs and ever Grand paper. No, 0:00:47.200 --> 0:00:49.120 we don't have you don't have any other I gotta 0:00:49.159 --> 0:00:51.440 make some news here, help me out. Ray Ray has 0:00:51.479 --> 0:00:54.240 the bravest bio I've ever seen. Let me go here, 0:00:54.320 --> 0:00:57.520 and I have a nodding familiarity with us. In his 0:00:57.680 --> 0:01:02.200 high school years, Daio was a media ocre student. What happened? 0:01:02.480 --> 0:01:05.399 How did you go from a mediocre student to the 0:01:05.520 --> 0:01:11.200 success you've seen over so many years? Um? Then, I 0:01:11.240 --> 0:01:13.600 like markets, I was a kid that I mean school 0:01:13.959 --> 0:01:16.840 that when they cram stuff down your throat and it 0:01:16.880 --> 0:01:20.920 just didn't interested in markets. Interested the markets interested you 0:01:21.000 --> 0:01:23.959 in the mathematics of the markets and the girls. Okay, 0:01:23.959 --> 0:01:26.319 of course we knew that, but Long Island. But the 0:01:26.440 --> 0:01:29.720 dynamics of it, the dynamics of the markets. When did 0:01:29.720 --> 0:01:31.560 that click in for you? Did it wait for when 0:01:32.120 --> 0:01:34.520 you were talking? Well, like I caddied, and this was 0:01:34.560 --> 0:01:36.880 the sixties, and it was you know, that was the 0:01:36.880 --> 0:01:39.240 hottest time in the markets. Like every time you get 0:01:39.240 --> 0:01:41.720 a haircutters shoe shot, and somebody would talk to you 0:01:41.720 --> 0:01:44.440 about the markets. So I caddied, and I took my 0:01:44.480 --> 0:01:47.240 caddying money and I put it in the markets. And um, 0:01:47.280 --> 0:01:49.120 I didn't know what I was doing. The first stock 0:01:49.200 --> 0:01:52.080 I bought was my whole criteria was it was the 0:01:52.080 --> 0:01:54.240 only company that I ever heard of that was selling 0:01:54.320 --> 0:01:57.880 for a lot less than five dollars a year, Northeast Airlines. 0:01:58.600 --> 0:02:01.960 They did well, and and and and you know, like 0:02:02.000 --> 0:02:04.520 my investment criteria was I could buy more shares, so 0:02:04.560 --> 0:02:06.240 if it went up, I'd make more money. That was 0:02:06.280 --> 0:02:08.360 my crow. Did it work out? Well? What happened is 0:02:08.360 --> 0:02:09.960 it has come to and he was about to go 0:02:10.040 --> 0:02:13.440 bankrupt and somebody acquired and it tripled, and I thought 0:02:13.480 --> 0:02:16.280 this game is easy. It was to start right, Yeah, 0:02:16.280 --> 0:02:18.480 But of course the game isn't easy. The game has 0:02:18.639 --> 0:02:21.320 not been easy for Bridgewater. Let's get this on the way. 0:02:21.320 --> 0:02:24.560 Our Catherine Burton has done wonderful reporting on the struggles 0:02:24.560 --> 0:02:28.400 of the entire industry. The difference is, you know, seven 0:02:28.440 --> 0:02:32.000 oh eight you had challenging years and you bounced back 0:02:32.080 --> 0:02:36.079 with a vengeance. Can you bounce back now? With markets 0:02:36.080 --> 0:02:39.640 at the zero bound um? Seven oh eight week was 0:02:39.680 --> 0:02:42.520 a great year because we caught the we anticipated the 0:02:42.520 --> 0:02:45.520 financial crisis and we did great, and then we had 0:02:45.880 --> 0:02:50.000 seven and so on. Recently we got we missed the 0:02:50.080 --> 0:02:52.800 COVID coming and then we got hit by the COVID 0:02:52.880 --> 0:02:57.359 coming um and so then we bounced back from from that. 0:02:57.480 --> 0:03:01.399 But I think we um we didn't take as much 0:03:01.520 --> 0:03:04.320 risk as we could because we added we added value, 0:03:04.360 --> 0:03:06.720 but not as much as we should have added. I 0:03:06.760 --> 0:03:09.639 want you to speak to Bridgewater clients now and those 0:03:09.680 --> 0:03:13.480 with billions lined up considering giving you money. What are 0:03:13.520 --> 0:03:17.840 the new procedures at Bridgewater to be more supple in 0:03:17.880 --> 0:03:21.320 the market, given where credit markets are again at the 0:03:21.400 --> 0:03:25.120 zero back Well, I don't think there's new procedures. It 0:03:25.320 --> 0:03:27.800 is the amount of risk that one wants to take 0:03:27.880 --> 0:03:30.800 at certain times. So if you take our all Weather Fund, 0:03:30.880 --> 0:03:35.000 for example, I think it's up ten plus something this year, 0:03:35.400 --> 0:03:38.920 it could have been um more aggressive. The question is 0:03:38.960 --> 0:03:41.160 in this risk environment, how much do you want to 0:03:41.160 --> 0:03:44.680 be aggressive? You know? So, um, you know, we're always 0:03:44.720 --> 0:03:47.840 looking at things that we can do better. That pandemic 0:03:48.400 --> 0:03:51.200 is something that we've examined and we learn a little 0:03:51.240 --> 0:03:54.400 bit more, but by and large it's you know, uh, 0:03:54.800 --> 0:03:58.960 it's the same, just more of it. Stephen Roacheville University 0:03:59.000 --> 0:04:01.840 had claimed at Morgan Stanley says it's the single biggest 0:04:01.920 --> 0:04:04.560 miss he's ever missed. Was how we came out of 0:04:04.600 --> 0:04:07.760 the pandemic. How do you feel the nation and our 0:04:07.920 --> 0:04:12.040 fiscal status will come out of the huge debt build 0:04:12.120 --> 0:04:16.560 up we have. How do you believe America will d debt? Well, 0:04:16.600 --> 0:04:20.520 this is all happened over and over again. Um, that's 0:04:20.520 --> 0:04:23.360 what quote my attention. When you hit a zero interest 0:04:23.440 --> 0:04:27.680 rate and you have too much debt and everybody needs money, 0:04:28.279 --> 0:04:32.040 the way it works is the government sends out the checks, 0:04:32.160 --> 0:04:34.599 but the government can't print money, so it has to 0:04:34.640 --> 0:04:37.599 borrow money. From the Federal Reserve and borrow money from others, 0:04:37.880 --> 0:04:40.240 and they don't have enough money, so that they print 0:04:40.279 --> 0:04:43.359 the money. And so the value of cash and the 0:04:43.440 --> 0:04:48.240 value of bonds as negative real returns, significantly negative real returns, 0:04:48.520 --> 0:04:53.240 and so money goes somewhere else. It goes into traditionally equities, 0:04:53.320 --> 0:04:57.200 it goes into gold, it goes into property, it goes Yeah, 0:04:57.440 --> 0:05:00.560 the house over there way just went up three thousand 0:05:00.560 --> 0:05:03.800 dollars when you sat down on the chair. Continue the 0:05:04.400 --> 0:05:09.560 But the same thing happened in um V one August 0:05:09.600 --> 0:05:13.200 nineteen seventy one. Same thing happened in March nineteen thirty three, 0:05:13.640 --> 0:05:16.120 and that was when they produced a lot more money. 0:05:16.279 --> 0:05:20.280 And that monetization which moves its way through the system mechanistically. 0:05:20.440 --> 0:05:22.919 The way it works, a bond confedera reserve comes in 0:05:22.960 --> 0:05:25.320 and buys a bond, it gives it to an investor. 0:05:25.800 --> 0:05:29.200 That investor then in turns puts it into other investments, 0:05:29.400 --> 0:05:31.680 and then it gives it to the public through the government. 0:05:31.760 --> 0:05:34.839 So this is um that's the way the mechanics. Regelio 0:05:34.880 --> 0:05:37.279 with this at the Granite Economic Forum on Bloomberg Radio 0:05:37.279 --> 0:05:41.120 and Bloomberg Television this morning. Let's go to China now, 0:05:41.160 --> 0:05:42.839 it's so much in the news. I wanted to wait, 0:05:42.920 --> 0:05:44.679 but I think we've just got to get to China 0:05:44.800 --> 0:05:47.560 right now. This is a new Beijing. Is it a 0:05:47.640 --> 0:05:50.320 return to an old Beijing that you and I knew 0:05:50.720 --> 0:05:53.640 when you were buying Northeast air or is you do 0:05:53.680 --> 0:05:58.000 you envision a Beijing that's moving to a new territory. Well, 0:05:58.440 --> 0:06:02.320 you have daughter in southern law in Shanghai, and you 0:06:02.600 --> 0:06:04.720 and and so we get to living at real time. 0:06:04.760 --> 0:06:07.719 We're living in real time. And the more you have contact, 0:06:07.760 --> 0:06:09.680 I think the more you understand it. I don't think 0:06:09.680 --> 0:06:14.280 it's well understood for a long time. The the question 0:06:16.120 --> 0:06:21.559 is how can communism and capitalism coexists? That's the riddle 0:06:21.560 --> 0:06:23.120 you have to answer. And he had to answer it 0:06:23.160 --> 0:06:26.040 a while ago. And what do these people want at 0:06:26.040 --> 0:06:29.279 the top and what they The answer to that riddle 0:06:29.440 --> 0:06:32.800 was told also by Deng shell Ping. When he was asked, 0:06:33.040 --> 0:06:35.600 he said, it's glorious to be rich. And then they 0:06:35.640 --> 0:06:38.279 asked about capitalism, and he says, it doesn't matter if 0:06:38.320 --> 0:06:40.240 it's a black cat or a white cat, just as 0:06:40.240 --> 0:06:43.200 long as it catches mice. And so the idea is 0:06:43.360 --> 0:06:51.240 producing wealth and so capitalism, capitalism, yes, but the redistribution. Okay. 0:06:51.240 --> 0:06:53.320 So we have four things that are really going on 0:06:53.360 --> 0:06:58.880 in China. If if you understand their intend um, common 0:06:58.960 --> 0:07:02.880 prosperity is the word now, okay, and there's been the 0:07:02.920 --> 0:07:06.880 objective to raise money and then to broaden the base 0:07:06.920 --> 0:07:10.280 of that. Okay, that's common prosperity. So if you look 0:07:10.280 --> 0:07:12.800 at their tax rates, they're lower than the United States. 0:07:12.800 --> 0:07:15.560 If you look at the measures of almost capitalism, they 0:07:15.560 --> 0:07:18.400 have as much capitalism or more capitalism, much more so 0:07:18.520 --> 0:07:21.520 than Europe for example. And then and now they're in 0:07:21.520 --> 0:07:25.720 a prospect to broaden that. So I think there's a 0:07:25.760 --> 0:07:30.120 tendency and an understandable tendency to think, because they are 0:07:30.440 --> 0:07:35.600 maoist and capital and communists, that they're going to go 0:07:35.680 --> 0:07:38.280 back to that kind of a thing. Then they're not. 0:07:38.560 --> 0:07:44.000 And den Cha Ping excuse me, Um, Shishi Ping. Just Um, 0:07:44.040 --> 0:07:47.520 for example, introduced the newest stock market in Beijing. He 0:07:47.600 --> 0:07:49.960 made a point of being the one who introduced the 0:07:50.000 --> 0:07:52.960 market in Beijing to the small and medium sized enterprises. 0:07:53.360 --> 0:07:57.040 They know that it catches mice. And so the issue 0:07:57.200 --> 0:08:00.880 is that the capitalist is not in control. The issue 0:08:00.920 --> 0:08:03.960 is that there's a system for the whole system. And 0:08:04.000 --> 0:08:07.040 then what they want to do is make sure that um, 0:08:07.080 --> 0:08:10.600 it's not a capitalist driven system. So and then there's 0:08:10.680 --> 0:08:13.440 data control and then and then you have to understand 0:08:13.440 --> 0:08:18.040 there's micromanagement. It's like the kids. There's a top down 0:08:18.120 --> 0:08:20.480 versus bottom up. Whether you like it or not, it's 0:08:20.480 --> 0:08:25.040 what happen our listeners and our viewers prosper from their 0:08:25.080 --> 0:08:28.880 micro management of the real estate debt collapse. We're beginning 0:08:28.920 --> 0:08:32.800 to see in China, what is the opportunity if we 0:08:32.920 --> 0:08:38.640 see their dominant investor position domestically go down in price. 0:08:38.760 --> 0:08:41.600 How do you play that? Well, the mechanics are the 0:08:41.640 --> 0:08:44.760 same as UM. The United States went through and everybody 0:08:44.760 --> 0:08:47.400 else went through, so it would be very similar to 0:08:48.400 --> 0:08:52.240 our two thousand eight mechanical. So what we do it's 0:08:52.240 --> 0:08:55.880 tappened over and over again is UM the central Bank 0:08:55.960 --> 0:08:59.160 makes a decision of moral hazard. You know, they never 0:08:59.240 --> 0:09:01.079 used to have more? Do you believe they're there right 0:09:01.080 --> 0:09:03.000 now after this week that we've seen in the market, 0:09:03.040 --> 0:09:06.120 So they knew that this was happening, and there's the 0:09:06.200 --> 0:09:10.199 preparation for this, and they know that there's more and 0:09:10.200 --> 0:09:13.440 and that's a good thing, not a bad thing. Because 0:09:13.480 --> 0:09:16.040 in the past it used to be contro that they 0:09:16.040 --> 0:09:19.840 would guarantee it the banks, five major banks would loan 0:09:20.120 --> 0:09:24.600 state owned enterprises and local governments with implied government guarantees, 0:09:24.640 --> 0:09:27.280 and it was bad. So the process is the same. 0:09:27.440 --> 0:09:30.400 Expect the exact same type of processes we would go through, 0:09:30.760 --> 0:09:34.079 which is to say that there will be more, There 0:09:34.080 --> 0:09:37.360 will be stung, investors will be stung. That's how it works, 0:09:37.720 --> 0:09:41.080 and that the system will be protected because it's denominated 0:09:41.080 --> 0:09:42.840 in their own courtcul I want to get this on 0:09:42.880 --> 0:09:45.240 the record or Redelio, because every Wall Street firm is 0:09:45.240 --> 0:09:47.800 saying this morning, this is not a Lehman moment. What 0:09:47.960 --> 0:09:51.280 we witnessed yesterday and the lesson in price. Explain why 0:09:51.360 --> 0:09:53.880 this is not a Lehman moment to Redelio, Well, because 0:09:53.920 --> 0:09:59.959 a Lehman moment produced pervasive structural damage through the system 0:10:00.080 --> 0:10:04.160 method that wasn't rectified until the Treasury came across in 0:10:04.280 --> 0:10:06.880 terms of it's borrowing, and then the bed came across 0:10:06.920 --> 0:10:10.840 with quantitative easy. But this is not that kind of 0:10:10.840 --> 0:10:14.600 a shake up type of thing. This is three billion 0:10:14.720 --> 0:10:17.800 is what they owe, and this is all manageable. The 0:10:17.800 --> 0:10:21.920 basic economics is for all countries in all time is 0:10:21.960 --> 0:10:25.480 that if you're that is in your own currency, you 0:10:25.520 --> 0:10:27.640 can deal with it. You could work you could work 0:10:27.640 --> 0:10:29.920 it out. We've seen it all happen over and over again, 0:10:30.080 --> 0:10:34.200 and it's a good thing that lenders get stung or 0:10:34.240 --> 0:10:37.280 that the borrowers get stung. That's how the system works. Okay, 0:10:37.280 --> 0:10:38.880 I want to go to my number one question to 0:10:39.000 --> 0:10:41.760 Ray Dalio. I'm fascinated by this. You and I have 0:10:41.800 --> 0:10:44.679 said at the Mbar at the Mandarin and Hong Kong 0:10:45.000 --> 0:10:48.319 and looked at that spectacular experiment. I had the honor 0:10:48.360 --> 0:10:50.800 of Lord Patton with us the day of the Hong 0:10:50.840 --> 0:10:54.800 Kong collapse, a change essentially and polity there. How should 0:10:54.800 --> 0:10:58.360 our western banks, the people you know, James Diamond Staley 0:10:58.400 --> 0:11:01.800 of Barclays, Moye Han of a reinvigorated Bank of America, 0:11:02.080 --> 0:11:05.920 how should the Western banks adapt an adjust in Hong 0:11:06.000 --> 0:11:10.360 Kong to new China realities? Well, I think very simply, 0:11:10.400 --> 0:11:13.520 you have to decide whether the rules and the place 0:11:13.679 --> 0:11:16.080 is a place that you're comfortable with. They will set 0:11:16.080 --> 0:11:19.280 the rules and you go in there and you decide 0:11:19.280 --> 0:11:21.520 if you're going to be part of that as a 0:11:21.520 --> 0:11:24.280 as a good citizen, or you're not and then but 0:11:24.400 --> 0:11:26.760 you don't jump in and out you're in. Other words, 0:11:26.920 --> 0:11:30.280 China's a strategic play. You're not going to jump in 0:11:30.360 --> 0:11:33.120 and out, so and and the amount that you're in 0:11:33.400 --> 0:11:35.920 should be that which you're comfortable with. It's the same 0:11:35.960 --> 0:11:39.560 as an investor. It's not smart to sell on the 0:11:39.640 --> 0:11:44.360 break or buy it's it's it's a strategic play. Most 0:11:44.400 --> 0:11:50.360 investors are very overweight in the United States or other places. Diversification. 0:11:50.640 --> 0:11:54.880 There's a competition, a big competition, a war of sorts 0:11:54.920 --> 0:11:59.800 going on between in technology and so on. The diversification 0:12:00.040 --> 0:12:03.240 put the amount that and the exposure that you want 0:12:03.280 --> 0:12:05.680 to have there because you have to have places on 0:12:06.360 --> 0:12:08.760 some money on two chips because they are at risks 0:12:08.800 --> 0:12:12.400 in the United States do when we look at technology 0:12:12.400 --> 0:12:15.320 and it's something you address courageously. In Principles, the book 0:12:15.320 --> 0:12:17.520 did so well. Whence the movie come out fourth of 0:12:17.600 --> 0:12:23.520 July one Hanks is playing Dalio. Okay, so Principles was 0:12:23.559 --> 0:12:28.360 a huge success. If President she said, read Principles, what 0:12:28.520 --> 0:12:31.000 would chapter would you wanted to read? What does he 0:12:31.040 --> 0:12:35.000 need to know about Dalio? Principles? Well, um, I think 0:12:35.040 --> 0:12:38.880 like everybody, Um, the key is um you know what 0:12:39.000 --> 0:12:40.760 you don't know, that what you don't know, and how 0:12:40.800 --> 0:12:42.319 to deal with what does he not know about the 0:12:42.400 --> 0:12:45.600 United States of America, the resiliency of this nation from 0:12:45.640 --> 0:12:49.000 the Pacific Rim, from Australia and MacArthur all the way 0:12:49.080 --> 0:12:51.480 up to Tokyo. Well, there's a different there's a totally 0:12:51.520 --> 0:12:55.440 different approach. It's UM, whether you like it or not. UM. 0:12:57.320 --> 0:13:01.400 We are a bottom up individualists. It's bill about individualists 0:13:01.440 --> 0:13:06.360 and build I think, and the individuals and bring immigrants 0:13:06.400 --> 0:13:09.520 to the United States, and and and that the power 0:13:09.559 --> 0:13:13.520 of the individual. In China, it is UM the top 0:13:13.600 --> 0:13:16.240 down and it is an an extended family. One of 0:13:16.280 --> 0:13:19.280 the leaders said to me, for example, it's like you know, 0:13:19.280 --> 0:13:21.720 a strict parent and that. And so when we deal 0:13:21.760 --> 0:13:25.040 with things like video games, do you want your kids 0:13:25.120 --> 0:13:27.480 to watch video games? In the United States, we would 0:13:27.480 --> 0:13:31.199 say that's a parental decision. Generally speaking, it wouldn't be 0:13:31.240 --> 0:13:33.920 the state to make that. They would say, it's terrible 0:13:34.000 --> 0:13:36.480 what's going on, and the state is going to mandate it. 0:13:36.800 --> 0:13:39.080 So that there are two those two approaches. And I 0:13:39.080 --> 0:13:43.120 would say that the understanding, the relative merits and understanding 0:13:43.559 --> 0:13:46.800 really how we can get along because there's a risk 0:13:46.800 --> 0:13:49.760 of war. You know, there's a risk of conflict here, 0:13:50.160 --> 0:13:53.199 and so understand how we can get along. I wish 0:13:53.240 --> 0:13:57.600 that yes, Chinese understood Americans better in Americans understood bring 0:13:57.640 --> 0:14:00.199 it back to not so much to Bridgewater at the 0:14:00.240 --> 0:14:03.720 alternative investment business again at the zero boundary. You've written 0:14:03.760 --> 0:14:06.760 about this, You've been very eloquent. Bridgewater Folks has a 0:14:06.800 --> 0:14:10.920 great series on YouTube with Bob Prince really walking through 0:14:11.400 --> 0:14:15.200 the realities of being at the lower bound. Is the 0:14:15.320 --> 0:14:20.000 game over? Is the volatility so taken out almost like 0:14:20.040 --> 0:14:23.720 a sum Nolan Japanese bond market, that we can't provide 0:14:23.880 --> 0:14:28.200 value anymore above long only institutional money. Yeah, the the 0:14:28.760 --> 0:14:32.120 value of interest rates um the impact of interest rates 0:14:32.160 --> 0:14:35.080 has been largely taken out in terms of the magnitudes. 0:14:35.120 --> 0:14:37.600 You're not going to have that kind of volatility, and 0:14:37.640 --> 0:14:39.400 if things go down, you're not gonna have the same 0:14:39.480 --> 0:14:42.320 kind of protections from the bonds as as you do. 0:14:42.600 --> 0:14:45.920 It's changed because then you get quantitative easing. It gets 0:14:46.000 --> 0:14:49.360 transmitted so that when you need an easy you get 0:14:49.400 --> 0:14:52.040 the printing of money and then you have the reflation 0:14:52.120 --> 0:14:55.320 type of dynamic. So that's the way, that's what the 0:14:55.440 --> 0:14:59.320 volatility is transmitted. We've had plenty of volatility in the markets, 0:14:59.320 --> 0:15:01.880 but not in the on market. Right. Look at how 0:15:02.000 --> 0:15:08.200 the markets obeyed since um in last April. They printed 0:15:08.240 --> 0:15:11.160 the money and sent out the checks. That's the way 0:15:11.200 --> 0:15:14.480 the dynamic works. Well, what will the consultancy business be? 0:15:14.720 --> 0:15:17.280 I mean, we've all been wrong that the actual assumption 0:15:17.440 --> 0:15:20.760 is single digit six or seven percent, and everybody and 0:15:20.840 --> 0:15:22.960 people that caught the right have been looking at double 0:15:23.000 --> 0:15:27.920 digit actual returns. Are you and Bridgewater stealed for a 0:15:27.960 --> 0:15:31.680 single digit future or can you be more optimistic? I 0:15:31.720 --> 0:15:36.320 think that if if I think we're going to get 0:15:36.520 --> 0:15:41.720 another round every another round of que quei huie dale 0:15:41.720 --> 0:15:44.400 you know now sorry, there's gonna be called queie dale. 0:15:44.400 --> 0:15:48.520 You're predicting another round of queueie not immediately. I think 0:15:48.520 --> 0:15:50.760 that what happens is you get a taper. I think 0:15:50.800 --> 0:15:54.640 like every tightening of interest rates has been less than 0:15:54.680 --> 0:16:00.560 the one before it, since two thousands, since at gy peak, 0:16:00.640 --> 0:16:02.960 and every trough in interest rates has been lower than 0:16:03.000 --> 0:16:04.640 the one before it. And then when we had zero, 0:16:05.040 --> 0:16:08.200 then we did quei and every que has been larger 0:16:08.200 --> 0:16:12.160 than the one before before it because we've accumulated so 0:16:12.280 --> 0:16:14.840 much that and that we're now printing. I think that 0:16:14.880 --> 0:16:18.480 you'll have probably one pull back and I'll call that 0:16:18.560 --> 0:16:21.280 a mock charge, and then you set the markets down 0:16:21.280 --> 0:16:24.120 because the duration of the bond market and the duration 0:16:24.120 --> 0:16:27.520 of assets is longer. That means interest rate sensitivity is greater. 0:16:27.880 --> 0:16:30.760 You have that particular correction, and then you'll have another 0:16:30.840 --> 0:16:33.040 round of that. And so I think it's that's the 0:16:33.120 --> 0:16:36.440 nature of the beast that we're in with the QUI understand, 0:16:36.520 --> 0:16:39.480 and that means negative real returns. The things that must 0:16:39.520 --> 0:16:42.400 happen is that cash is going to have a lower 0:16:42.440 --> 0:16:47.440 interest rates than bonds. That negative UM let me answer, 0:16:47.600 --> 0:16:50.520 Let me get my thought through, and then it'll come through. Continue. 0:16:50.880 --> 0:16:56.760 So what you'll get is um a significantly negative real 0:16:56.880 --> 0:17:01.840 cash rate, a negative and probably more significant real bond ary, 0:17:02.400 --> 0:17:05.320 and that you're going to continue to have to have 0:17:05.920 --> 0:17:09.920 interest rates significantly below nominal GDP. Growth in other words, 0:17:09.960 --> 0:17:13.600 inflation pressure real growth. The average thing is going to 0:17:14.359 --> 0:17:19.040 increase this tecnominal nominal g d P. That's production of 0:17:19.160 --> 0:17:22.399 inflation and growth. You put those two things combined, you 0:17:22.400 --> 0:17:24.480 would rather own a piece of that, which is a 0:17:24.480 --> 0:17:27.440 piece of economy, than you would want to own interest rates. 0:17:27.560 --> 0:17:30.240 That's the environment. We've got to wrap it up here 0:17:30.240 --> 0:17:33.600 in a bit um. People are listening to this worldwide. 0:17:33.640 --> 0:17:37.600 My colleague Matthew Miller is in Berlin listening, and he's 0:17:37.640 --> 0:17:41.159 in my ear with Bloomberg Technology saying can you just 0:17:41.480 --> 0:17:46.360 ask him about bitcoin? Paulson of the hedge fund game, 0:17:46.400 --> 0:17:49.720 not Henry Paulson, the other Paulson, the great benefactor of 0:17:49.800 --> 0:17:53.880 Central Park. John Paulson is saying bitcoin is a fraud. 0:17:54.040 --> 0:17:57.119 And I speak with my own words there, But what 0:17:57.200 --> 0:18:00.560 do you think about bitcoin? Is it a durable thing 0:18:00.680 --> 0:18:05.080 for banks or for institutions? UM? I always going to 0:18:05.200 --> 0:18:07.399 ask a big I'm not an expert on bitcop but 0:18:07.440 --> 0:18:09.240 I'll tell you what I think. I'll tell you what 0:18:09.280 --> 0:18:11.920 I think anyway. Anyways, take it it's not worth much, 0:18:12.320 --> 0:18:18.199 but um bitcoin um has an imputed value, not and 0:18:19.160 --> 0:18:24.320 uh not a intrinsic value. And and so it depends 0:18:24.359 --> 0:18:28.040 what it's perceived as it's a tremendous accomplishment to have 0:18:28.160 --> 0:18:30.720 done that programming, not have it hacked, and to have 0:18:31.040 --> 0:18:35.600 its advancement at the same time, and so it will 0:18:35.680 --> 0:18:40.960 have the perceived value that it is given by the marketplace. Uh. Now, 0:18:41.359 --> 0:18:43.760 at the time. Right now, if you take the value 0:18:43.760 --> 0:18:46.000 of bitcoin, you to take the price, what should the 0:18:46.040 --> 0:18:50.200 price be? And you since the quantity doesn't change, you 0:18:50.240 --> 0:18:53.080 know what, it's a function of demand. Right now, bitcoin 0:18:53.200 --> 0:18:56.080 is worth a little less than a trillion dollars. Gold 0:18:56.200 --> 0:18:59.200 or gold in existence is worth if you take central 0:18:59.240 --> 0:19:01.800 banks and jewelry out of it, about five trillion. So 0:19:01.800 --> 0:19:06.119 it's about of that market that represents, you know, the 0:19:06.200 --> 0:19:09.240 hedge market and so on. I think that there. I 0:19:09.280 --> 0:19:14.000 think if you if it's successful, really successful, um it, 0:19:14.000 --> 0:19:16.040 it's not going to be a lot more than that. 0:19:16.240 --> 0:19:19.480 And if it's um and also if it's successful, there's 0:19:19.480 --> 0:19:22.600 a risk of government will outlaw it. So that's what 0:19:22.640 --> 0:19:26.080 I think. Seconds. I believe there's a new book coming out. 0:19:26.880 --> 0:19:29.440 Give us twenty seconds on your new book coming up. Well, 0:19:29.480 --> 0:19:32.240 it's a study I did to understand what's going on now. 0:19:32.280 --> 0:19:35.040 I did the last five years to understand the rises 0:19:35.280 --> 0:19:38.320 in declines of reserve currencies and empires. And it's called 0:19:38.320 --> 0:19:42.439 the Changing World Order, and it um it describes the 0:19:42.560 --> 0:19:45.840 changing world order we're in. But putting it for an 0:19:45.880 --> 0:19:48.800 historical perspect we'll go for another hour here. I'm kidding 0:19:49.200 --> 0:19:51.840 Dalio with us, thank you so much, with Bridgewater today, 0:19:52.240 --> 0:19:54.840 the huge impact of principles a few years ago in 0:19:54.840 --> 0:19:57.960 the changing world order, look for that year, in the 0:19:58.040 --> 0:20:01.720 coming weeks, h in months. Just so much to talk 0:20:01.760 --> 0:20:05.399 about here over the next number of hours of the 0:20:05.400 --> 0:20:14.600 Greenwich World Economic Form. We start strong in the sell 0:20:14.640 --> 0:20:18.080 hear with Mr Dahlio, with us later with Noil Rebini 0:20:18.760 --> 0:20:22.159 crisis economics of eleven years ago, but far more than 0:20:22.200 --> 0:20:25.880 Nora Rebini, who got way out front of that crisis 0:20:25.880 --> 0:20:29.560 of of oh five, seeing things come along in oh seven, 0:20:29.640 --> 0:20:31.520 oh eight, oh nine. And I want to give you 0:20:31.520 --> 0:20:33.919 a little window right now before we get to the 0:20:34.000 --> 0:20:36.840 present moment of what Noil and I have lived. There 0:20:36.960 --> 0:20:39.600 was you and I in Davos at a hotel. It 0:20:39.720 --> 0:20:42.320 was a late night and we sat there and we 0:20:42.480 --> 0:20:46.400 penciled out the reversion of the mean of the housing market, 0:20:46.880 --> 0:20:49.920 and you said it's got to end. And it did 0:20:50.359 --> 0:20:54.240 a year later, maybe eighteen months later. Bring us forward, 0:20:54.359 --> 0:20:58.520 now that we are so debt encumbered, do we have 0:20:58.600 --> 0:21:01.159 the degrees of freedom that we had when you and 0:21:01.200 --> 0:21:05.359 I said at that quiet bar in Davos. Well, my 0:21:05.440 --> 0:21:08.840 concern is that compared to a decade ago, that levels, 0:21:08.920 --> 0:21:13.320 both private and public are much higher than before twenty 0:21:13.400 --> 0:21:17.280 years ago. That to GDP ratial globally was about GDP. 0:21:17.680 --> 0:21:20.760 Right now is three and sixty and rising in advanced 0:21:20.760 --> 0:21:24.800 economies is four percent of GDP and rising in Chinese 0:21:24.800 --> 0:21:28.280 tre GDP and rising. So my concern is that we 0:21:28.320 --> 0:21:31.119 are in a that trap. It's not just physical dominance, 0:21:31.320 --> 0:21:34.119 but when central bank is gonna want to essentially phase 0:21:34.119 --> 0:21:38.159 out unconventional monetary policy, given that that ratios, there is 0:21:38.200 --> 0:21:40.240 a risk of a crash in the bond market and 0:21:40.280 --> 0:21:43.560 the credit market, the stock marketing economy, and therefore they 0:21:43.560 --> 0:21:45.920 will be in that that trap and unable to normalize 0:21:46.040 --> 0:21:49.280 policy rates. That's why I see inflation. I had drubin. 0:21:49.440 --> 0:21:51.480 I am so honored that you're here. I am pleased 0:21:51.520 --> 0:21:54.320 to announce folks that Berry I Can Green's new book 0:21:54.520 --> 0:21:57.360 and Debt is my book of the year, and this 0:21:57.440 --> 0:21:59.360 is the guy that talked to about it. I can 0:21:59.400 --> 0:22:03.720 Green space and some golden feathers over this new debt crisis. Now, 0:22:04.080 --> 0:22:07.439 how do you interpret the outcome of this build up 0:22:07.440 --> 0:22:11.080 in debt, which is life at zero bound. Well, we're 0:22:11.119 --> 0:22:13.520 in a situation in which, in normal times we're not 0:22:13.640 --> 0:22:17.320 reducing debts and deficits, while whenever there is a crisis 0:22:17.359 --> 0:22:20.560 then we have to back stop the financial system. There 0:22:20.640 --> 0:22:23.240 is more built up of public debt, there is more 0:22:23.280 --> 0:22:25.840 built up of private debt because with zero policy rates 0:22:25.920 --> 0:22:29.359 or negative policy rates or quantity division and credits is cheap. 0:22:29.640 --> 0:22:32.720 So we are in that supercycle where both in good 0:22:32.760 --> 0:22:35.760 times and in bad times that racis arising, and therefore 0:22:35.760 --> 0:22:38.560 eventually central banks are in a trap. People said they're 0:22:38.560 --> 0:22:41.280 going to normalize policy rates, but with these levels of 0:22:41.400 --> 0:22:43.959 private and public that if they were trying to do that, 0:22:44.280 --> 0:22:47.280 that they market crash and economic rush, and therefore I 0:22:47.320 --> 0:22:50.119 think the path of list resistance given that that race 0:22:50.240 --> 0:22:52.280 is going to be to wipe out the real value 0:22:52.280 --> 0:22:55.879