Ray Dalio, thank you so much for joining me. Oh, thank you for having me. Talk to me about what you see happening in this part of the world. Well, it’s um the most vibrant u part of the world. there is uh a combination of attributes that make it very appealing and vibrant and so the reasons are I would say the most important thing for all countries is educate your children well and make them civil so you and then have them come out and be productive in a productive environment uh that is what exists here so that there is a productivity and a vibrancy that exists and be financially sound. In other words, have savings and have income so that you don’t have an economic breakdown and then stay out of wars. And so these elements have um made this evolution. It really began with one man Shik Zed 54 years ago. And then um he had he was the father of the country but he was also the father of the leaders and then the leaders had this vision to make it uh really a paradise a place where uh in all elements all that those energy but also a safe place where uh you can educate your children. Well, I have um my son and his wife and my grandchildren live here and go to school. Do they really? It Yes, it has all those elements and it’s having it in a world that outside is more troubled and so this is um that’s what’s going on and it makes it a a great place. You look at a place like London today, obviously they just delivered a budget that disappointed people on both sides of the aisle. When you look at a place like London, the United Kingdom, what is your takeaway there? It’s all happened in history. It’s I mean, are they right? Everybody’s going to disagree and everybody’s because no those who when you raise taxes, they want to leave. Yeah. And then and they’re coming here. Come come come here, right? Yes. So, um and then they’ll get angry. And if you don’t raise taxes and they’re so rich and and so on and they’re and they need the money, they’ll get angry. Yeah. And so, you create this conflict. But you can’t raise taxes and you can’t cut spending. Yes. Okay. And you can’t borrow more. So then you have this dynamic where you’ve had four prime ministers in the last 5 years. The same is true for France. There there’s there’s the new party that comes along and promises it will be different and follow me but it doesn’t work. Yeah. Right. And so that is the nature of the dynamics. There’s only one successful path which we’re not going to get probably and that successful path is that there’s a strong middle so that you the two sides don’t fight and that they’re smart and they realize everybody has to sacrifice something and if you sacrifice take a little bit from everybody and then work it out in terms of a smart way then you’d have a better result right and that’s not unlikely to happen. So that’s the way the world has worked. Are we coming upon a cataclysm? And what’s the answer? There’s the answer for the society and then there’s the answer for the individual. They’re two different things, right? The answer for the individual is to not be in the middle of this. I mean because that is a problem. That’s why you see people move, right? And then yeah the answer for the society is only can you rise above this to make this a common problem that can be handled in a bipartisan way not away from the extremes but instead so because one extreme is going to fight against the other extreme and that conflict itself is so bad. Can you draw the middle together, moderates together and have a strong leadership? And that strong leadership has to have people who agree to follow so that they can do the difficult things and work together to make those smart difficult changes so that you can make it through that. Unlikely, but that’s that’s the picture. Do you anticipate that we’re going to see a postdemocratic order in Western society? Most likely you’ll have a greater conflict. And who will be the protagonist in that? Well, within the country, most likely you’re going to have an economic problem having to do with the debt and the money issue. Yeah. And we’re talking about the United States or Western democracies generally. Western democracies generally, although China also has its chi its debt issues. So that everyone wants to borrow because they all need more money, right? Yes. For military reasons, all of those things. and nobody wants to lend to them on a the same basis. So you have an economic component, then you have this economic causes, the internal conflict and the external. Most likely I think that we’re going to be moving to determine who are the winners and who are the losers and that’s going to be determined by a fight of sorts of who becomes dominant in that environment. So that’s what I’m concerned about. Who’s winning that at the moment? Oh, very tough to say. You know, I, as I said, these policies are turning up. The governments are turning over like this, you know. I um I can’t say you the more hard right you’re going to get, the more hard left you’re going to get, you know, and so we can see like New York and you could see in this particular that populism. I can’t call the winners and losers. All I could say is that I really believe that this is the nature of the environment some places and not the nature of the environment in other places. Yeah. Throughout history then as I say there’s the winners, the losers and the uh neutral countries. The neutral countries do better because they can maintain the civil. They attract the populations the best and the brightest to be able to do well during that environment. Speaking of civility dynamic that’s going on. Speaking of that civility, was President Trump then right to have M Donnie come to the White House and at least try to start that dialogue? Oh, one would hope, you know, one would hope the because the worst is is the war. Now, whether that can be bridged or whether it can’t be bridged, I can’t say. Okay. Because there’s a big difference in the in the vision of what what what success is. So whether that you knows anything I would say I would say it’s more likely to be a shortterm love affair. But but the question is how does that get bridged? But at least it was indicative that okay let’s try not to go straight to fighting. Yes. Let’s go to try to talk and see where the bridges can be made. Would democracies benefit from longer terms? And I’m talking about instead of four years for a president his first term could be eight years. Congressionally, they’re running every two years if you’re a congressman. In your mind, do they need more time to put an agenda? Mark, that’s everything has a pro and a con. Um, most of the population would choose not to give them more time. As I say, what we’re seeing in other countries is change the leader quickly. Okay. So, now the question is how does it feel to be stuck for eight years with one leader? Okay. You know, I would think not. And there is the question of what’s too fast. So um I I don’t think it’s a matter of speed. I think it’s a matter of um does the person have a true not political vision that’s a strong vision about what should be done and can they work together with others to do that? And everybody who has opinions everybody’s so opinionated and critical that you can’t get anything done because they don’t want to do any tough things. you know, it’s if you have to get your finances in order and you have to behave well and do all of those things, it it’s tough. It requires a discipline and so on. And so the question is, can you have that kind of leadership? Yeah. When you look at the fact that the president is so internationally focused at the moment, trying to get the deals done with Ukraine and Russia and what he’s done on Gaza, at least so far, the ceasefire, is there an argument to be made he needs to be more domestically focused? I think domestic is important. I think international is important. I think he’s, you know, he’s dealing in his way with each one of those things. Yeah. You know, you think he has the bandwidth to encompass? Yeah. And and also um I think so many people are too quick on such judgments. You know, everybody’s got an opinion and then they those are opinions then knock people down and then all of a sudden uh a new one comes in. You know, he’s attacking issues. Now, how he’s attacking issues and whether that’ll be satisfactory for the people, um, one can’t say. We’re going to come into midterm election soon. Yeah. And when we have there’s a good chance that the Democrats will take the House. Yeah. And if the Democrats take take the House, you’re situally led house in a war with the other side. and that’s going to make things tougher. And so I’m just describing the reality. I’m not an ideological person. I’m not I’m just, you know, I’m just a guy who has to understand and bet on what’s going to happen. And so when I look at those types of things, I think that’s the most likely picture. Where does one put their money to work in that situation? I think that um generally the most important thing is to know how to diversify a portfolio well so that no matter what happens you’re going to be in a situation that’s beneficial. I would say if I was to take tilts I would say holding debt assets is less attractive. There’s a lot of the supply of debt and producing debt and probably that debt is more likely to be monetized. they’re also for um people are to some extent underweighted in an alternative money than the fiat currency. So that would imply probably they don’t have enough gold let’s say. So I think between people should have between five and 15% on gold depending on where they’re uh not without a view just to diversify their portfolio because gold tends do well when the other parts of the portfolio don’t when you have that crisis and they’re monetizing debt. So I I would say there would be tilts but both by and large I wouldn’t want to put together a portfolio that’s balanced enough and produces a real return. In other words, an inflationadjusted return. Yes. I think people tend to think too much in nominal amounts of money. So and they tend to think in their own currency. And so they if they’re if they’re measuring it in nominal amounts of money, in other words, how many pounds how many dollars uh and is my portfolio going up in dollars, that’s dangerous because as the dollar goes down or or pound sterling or the yen goes down, um you’re looking at other things going up when you’re losing buying power. So I would want to make sure that I had a real return. Um and then some of those uh can be inflation indexed um investments. When you look at Fed policy today, are you worried um about frankly um what’s happening between the president and Jerome Powell or are you taking a broader and longer view? Both. You have um a very diverse economy. Okay. If you take the top 1% or the 10 top 10% of the economy and you take really it’s a very small percentage the the magnificent seven stocks and you take those who were behind them and so on which is so important. You have that small 10% of the economy and um when you stimulate you’re going to stimulate that bubble in a sense at the same time as you have the bottom 60% of the economy. the bottom 60% of Americans, 60% of Americans have below a sixth grade reading level and their their whole environment is a whole different environment. So to run a monetary policy that is not too stimulative for the bubble and not too restrictive for the other part of the economy is a very very difficult thing. How they run that monetary policy. Um, I think that we’re going to come into a period of time where you’re going to start to see cracks appear. For example, um, when interest rates went up, a lot of holders of debt did not experience it because they had the maturity of their debt. But now those debts are maturing and they’re having to reset at a higher interest rate. And when they set at a re higher interest rate, you start to see the cracks. you’re starting to see the cracks in venture capital and you’re starting in private equity and you’re starting to see those types of cracks. That’s not something that’s easily and effectively dealt with by just making everything easier too. So this is again how do you achieve the balance of all of this to achieve a healthy result. Yeah, there’s a risk as we come into let’s say the next two years that we those cracks begin to widen and then you also have the politics. The confluence between a bad economy and bad politics is a very scary thing. Yeah. What in your mind? What is the first um casualty of that? Well, uh I think you that you’d start to see situation very similar to what we’ve seen in the UK or in other countries where it becomes more and more difficult to sell the debt and that also you start to see credit spreads start to widen and that’s not an easy thing to control. So a red flag would go off if the governments again started to buy bonds. Okay. and the central bank started to buy bonds and that would be debt monetization. I think you see it in the uh gold market. Why is the gold market going up? Because it wants another money. Okay, money is is supposed to be a medium of exchange and a storehold of wealth. But when there and and debt is money because when a when you’re holding a debt instruments, you’re holding um an instrument where there’s the out they’re promising to give you money. If you devalue that money and we have a risk that that’s always the solution to devalue the money. Yes. Then you need an alternative money. It’s the money that can’t be printed is what the gold market is. So you start to see an environment where it’s tougher to sell the bonds. You start to see an environment where there’s more movement into the gold, that alternative storehold of wealth, that alternative money. You start to see credit spreads start to rise. When you see that dynamic and then you start to see easing causes the bond market to sell off rather than to rally because you would expect easing would make it rally. You see it also by debt maturity shortening that the government shortens debt maturities so they can control the lower and so it reduces the supply they have to sell. Those are classic ingredients that say okay watch out. Yeah. The perfect storm. Yeah. If if that were to begin to occur and you’re already seeing those cracks as you say coming on the four in your mind um what does that set off if we’re talking about um political unrest particularly in countries that you mentioned well it starts like France and Germany and UK and US it starts to set it starts to set set off um an economic problem that can’t easily be dealt with with monetary policy right because providing the money which is the usual path. You provide the money. Yes. To the debtors who can’t pay and and something devalues the money. It creates an environment that very similar to that which followed 1971. A stagflationary environment. And then that has political ramifications, right? Nobody likes it’s tough to stay in power and and so you get the political um conflict and then with that political conflict they bring different and conflicting alternatives and that comes to and we’re now in a situation where do they buy the election? Do they do they accept losing like you take a vote? People are beginning to feel that the system is rigged because everybody has a point of view on this issue. your left or your right and whoever appointed the people in the Supreme Court or wherever it is that they’re all rigged and they don’t and so now you get into this conflict and that’s that’s a and then but we’re dealing with then power just like the international world order we’ve gone from a world order in which there was a multilateral world order that was supposed to be a system the United Nations the world uh bank the world trade organization the world this and that and then there was voting and sort of that sort of aren’t we all civilized we’re all beyond that right so now you have power is the new world order you have that domestically power is the new world order right and that creates a risky environment are you a globalist I’m a globalist I mean when I mean globalist uh I unapologetically a globalist I’m unapologetically a glo globalist meaning I think the question when you ask is it a globalist This um is really a question of how are people going to deal with each other? Not just you, who’s your constituency and can you rise above um selfish needs and then deal with the common good. Do you karma? If you look at, you know, most religions have a notion of how people should deal with each other. um you know do unto others as you wouldn’t have them do unto you. Can you peacefully and and with empathy and so on deal with that? These are very this is a humanity question an evolutionary mindset question or do you have to get into a fight? Yeah. And so when I look at the efficiency and and I should say also what we are seeing it now is global deals global business deals. Yes. And finance have never been more global. Yeah. So, while you’re seeing uh companies uh excuse me, countries become more isolationist and more controls, uh never before will you see a gathering of all these people from all over the country right here today and in other places. No matter where they are, they’re looking at deals and they’re doing deals together. So you’re seeing so as the world becomes more tribal and well it becomes I would say is it’s becoming more global I mean in terms of in business in in doing those deals right and so when you think about the Middle East and then doing deals with whether it’s the United States or China or other places just to get their people most likely to you know do deals together. So you’re seeing a great global force exist while we’re seeing this conflict between the uh the countries. Yes. I think that um if we can work well together, I mean when they asked me glo globalist if we can work well together and operate in a way where we can um you know prosper together and empathize and know each other better, it’s a better world in my opinion. Ray, it’s great to see you here in Abu Dhabi. Thank you so much for joining me on the record. It’s great to be with you. Thank you.
