WTF Is Wealth? Ray Dalio Breaks It Down w/ Nikhil Kamath | WTF is Finance Ep 2

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Hello everyone.

Amazing.

I've created a leading indicators of what countries have their ingredients project the next 10 years growth rate.

India is best. I think India over the next 10 years has all the ingredients to really be the strongest growth rate and and an improvement.

A >> youngster in India who's 25 years old, how does he make money?

>> Two things I'd suggest. First, play the game. Find a game that you love and then

game. Find a game that you love and then be around people who are pros at playing the game so you can chat about it.

That's a good path.

How do you view crypto and the world of Bitcoin or even like stable coin? Tell

me this. If you were to back >> You got to give me one question at a time. Yeah.

time. Yeah.

>> Okay, let's do Bitcoin and then we're stable coin.

Hi Rey. Uh thank you for doing this. As

a trader myself, I've been trading now a long time about 21 years. I think there will be a lot I can learn from you and many others back home in India like me

can also learn from you. If I can contextualize the audience we are talking to today, they are young Indian

wannabe entrepreneurs uh investors, want to be traders, people who want to make a living in the stock markets. I would say between the ages of

markets. I would say between the ages of 18 and 30.

>> Wonderful. That's that's exactly um the group that I would like to speak to at this stage in my life because I've learned a lot and I would just want to pass what I've learned along to those

people. So, thank you for allowing me to

people. So, thank you for allowing me to do that.

>> No, thank you for doing this.

Everybody knows you, but if we could go through like the big events of your life and very briefly just to set context again, could you tell us how you look at

your life from the very beginning from when you were younger up until today?

>> Okay.

Um, my dad was a jazz musician. My mom

uh was a sort of say it mom. Uh I was raised in u I didn't have any brothers or sisters.

Um it was a loving family. Um it was um not poor. Not there was lower middle class.

poor. Not there was lower middle class.

Um I did jobs when I was young. Uh I one of those jobs was catting for at a golf

course and because I cattied at a golf course at the time when there was a stock market. Boom. The people I cied

stock market. Boom. The people I cied with I would have conversations with and I took the money I earned $6 a bag. I

carried two bags $12 for a round. When I

got $50 I would put it in the stock market. And so I started um playing

market. And so I started um playing around in the stock market much like you're describing our audience does. And

um the first stock I bought I bought only because it was the only company I ever heard of that was selling for less than $5 a share. And I thought, well

then I can buy more shares, so if it goes up, I'll make more money. Which of

course made no sense. But it was a company that uh was about to go bankrupt, but another company acquired

it and it tripled in value and I thought this is easy. It's not easy, but I got hooked on the markets at 12.

>> Do you think it's like that? I I often think about this. There was a really tiny when I was 17, I bought this company called Marsoft, a defunct software company in India and the share

price again doubled or tripled. The

first experience of the stock market.

The people who tend to continue are the ones who get lucky. Do you think so?

>> I think positive reinforcement works.

Negative reinforcement. Sure.

>> If you lost money on your first trade, you would never have done it. Maybe

>> probably, you know, you put your hand on a hot stove and it takes How many times do you do that and then you react to it?

So, I can't say for sure, but probably.

But I got into the game, >> right?

>> It was a game and it was it's a great game.

>> If you play it, you think of it as a game and that if you play it well, that pays you money.

>> Do you think the stock market has emotion? Does it treat you a certain way

emotion? Does it treat you a certain way at the beginning?

>> I I think it's unemotional. We are

emotional and we certainly have emotions. N that's

one of the reasons the way I learn to invest uh was to write down my criteria when I was making a decision. Every time I'd

make a decision, I would then think why am I making that decision? And then I write down the

decision? And then I write down the criteria and see how it would have worked in the past. It took me a while to do this >> because of my experiences and also you

know when you're wrestling with positions particularly a position that goes against you. Yeah.

>> You know you're wondering am I missing something and then how old do how long do I hold that position and what do I

do? So emotions and intellect and lack

do? So emotions and intellect and lack of perspective is a pom. So when you have a decision rule that then you know how it would have worked all through

time. Now you're just playing that

time. Now you're just playing that decision rule and it helps you know.

>> Did you trade on leverage at the very beginning?

>> Um I didn't trade on leverage in the beginning but I bought in the beginning very early in my age I bought futures cuz it wouldn't give me leverage.

>> Yeah.

>> Okay. I decided very nobody traded futures right.

>> Okay. there were no commodities. It just

very little. Okay. But I realized that it would give me leverage.

>> And so I figured if I was going to be good in the markets, I would want to do have that leverage because I'd make more money. So that's what drew me to.

money. So that's what drew me to.

>> Was it about four or five times leverage?

>> Well, it was the futures contracts.

>> The margin requirement would be about 15 20%.

>> Yeah. And that would be a good demo, >> right?

>> Odd one. Yeah. And what kind of contracts were you trading in the very beginning?

>> Well, then it was commodities, >> right?

>> Okay. So, then it was um um everything from precious metals to

cattle where I got really into grain and uh livestock and um you know those types of commodities.

So when I uh so my background okay you wanted a couple of stories so I'll give you the stories.

So I did this and I went to college and then um what was a defining moment my learning experience was um I the year I

graduated from college 1971 I clerked on the floor of the New York Stock Exchange >> and this is before I went to graduate

school so it was in the summer >> and on August 15th 197 71, President Nixon defaulted on his obligation, the

US's obligation to give gold paper money.

>> You know, back then, gold was money. The

paper money was like checks in a checkbook.

>> Did he default or did he say that he will no longer back the dollar with gold?

>> I don't know the difference.

>> The way you say it, there was a promise that you could bird in, take $35, get an ounce of gold. Then he said, "You can't take your $35 to get an ounce of gold."

So that to me is >> and that was because of Vietnam and going to the moon.

>> Well, because we were spending a lot more. This is the thing through history.

more. This is the thing through history.

>> Yeah, >> we always have to look at this. We'll

get into this, I'm sure, but through history back to the Old Testament and everything, the years of Jubilee and so on, it's when there is a lot of claims

on money and there's not enough money in the bank.

>> Mhm. Okay. And that's happened throughout history. So we have a central

throughout history. So we have a central bank that was that started in 1913 and the idea was it had gold and there were many more claims on the gold than

there was gold in the bank because for the same reason you borrow a lot of money and when you borrow a lot of money and a lot more one man's debts are another man's assets. So they're holding

it expecting that they can get the money and then they want the money but there's not enough money. And that was the Federal Reserve Bank's problem in 1971.

>> What is money?

>> What is money? Money is money is a medium of exchange and a storehold of wealth. Very important to to recognize

wealth. Very important to to recognize it as a storehold of wealth. What is a storehold of wealth? Okay. So when you

um in India many people realize that gold is a storehold of wealth. Now what

we uh and then we p it's the perception of money >> that it can be used as a medium of exchange that I can go around the world

>> and I can go from one country to another and I can turn it in and get value to be able to buy things. Right? So that is

what it is. Um and through history, gold has been the most used money, most accepted around the world. Um you know,

then when uh but it's the perception of it. And so when we think about let's say

it. And so when we think about let's say money as we commonly think about it, which is fiat money, then that >> but there's a difference there, right?

Like gold is a asset which is not a liability on anyone else's book.

>> Exactly. It's a money.

>> It's the only money. Well, maybe it's not. We could talk about crypto is

not. We could talk about crypto is crypto, but yes, gold is the only money that you can have and nobody has to give

you anything to have it.

>> Yeah. Other money, all other money is dependent on somebody giving you something. Okay? Whether they give you

something. Okay? Whether they give you and so it's unique in that it's confiscation risk is less than others.

So that's why one of the reasons gold is unique but it is also back to your main point main point it is a widely recognized storehold of wealth that I

could bring around the world and I could uh use it and it's particularly important in um that it is not deflate uh you can't deflate its value but you

can't print it you create more of it and then it also in order to hold its >> I have a personal question here I hold a lot of gold I for a long time have kept

10% of my asset base in gold. U the

thing I wonder with gold is while it can't be replicated today. I mean there are people who are talking it about it as a byproduct of fusion and how they will create it like they did lab grown diamonds. I I don't want to extrapolate

diamonds. I I don't want to extrapolate that far.

But with gold isn't it based on faith?

Isn't it a bit like religion? Because

gold inherently I get that it's a great place to store value but does gold have enough utility in isolation?

>> I money doesn't have much utility generally speaking right if you're carrying around cash it's paper it doesn't have much utility.

So I don't think it's utility. I think

you got to get out of the utility perspective of gold. Um every go every thing that's money could be a risk. Does

it stay money? So for example in the history of gold when there were great discoveries of gold then the value of gold is affected by the quantity of

those discoveries and if they could replicate gold or like they'd been replicating diamonds then that becomes a risk of gold. So there are all risks to

all monies and that are of a similar nature in terms of uh replicating the the supply of them or also um the

acceptance of them as a money. You know

there became um gold fell out of fashion >> as a money and bonds fell into fashion.

But the historic thing to know is that throughout history there is always the temptation uh when when when you uh there's a fiat money which easily could

be produced and then there's the temptation of the interest rate.

>> Mhm.

>> Okay. Gold doesn't have an interest rate.

>> Okay. No interest rate >> in India it does.

>> Oh gold has an interest rate.

>> Uh so India doesn't produce very much gold of our own. we end up importing a lot of the gold. So to be fiscally prudent, the government has this plan

where if you buy sovereign gold bonds from the government, digital gold bonds, >> yeah, you get a you get that ain't >> gold, >> but you're also able to monetize physical gold because you can lend it

out for a certain percentage.

>> But you're still dealing with credit risk.

>> Okay?

>> So what you're getting paid for is credit risk, right? So it's not gold.

It's a promise to get your gold back, >> right? Then that's what money was. And

>> right? Then that's what money was. And

that's why it would have an interest rate. You have an interest rate that on

rate. You have an interest rate that on the promise to get your gold back.

That's what everybody believed. And

that's the great trick through history.

The great trick of history and everybody believed it back then for a long time is I if I hold the promise to get the gold

then I will get an interest rate and I could always turn my money in for gold.

So why won't I hold the promise to get the gold and get an interest rate on it rather than to hold the actual gold which wouldn't give me an interest rate.

And that was the trap and that is always the trap. So when you look at it today,

the trap. So when you look at it today, let's say and you you think okay I I think it's just arbitrage. Um let's say

I can hold gold that gives me no interest rate. I can hold Swiss Franks

interest rate. I can hold Swiss Franks which don't give me much interest rate.

I can hold US dollars what which will give me depending on the maturity but let's say will give me a 4% interest rate. My basic question is if gold goes

rate. My basic question is if gold goes up by more than 4%. Go gold has to go up by more than 4% then I'm better holding

gold and if it goes up by less than 4%.

Then I'm better holding the bond uh that that will operate. So I keep thinking about though you know that question and the world keeps thinking about that question.

>> Mhm. When I think of store of value, I also think of gold, money, US dollar, whatever currency be it. If I own equity in

something very basic like a farm for example, which is producing a certain good, that makes it more funible almost, right?

>> All assets >> are valued as their appreciation in price and their yield. the yield that you're getting

and the price change and that's a total return. And so all assets you compare on

return. And so all assets you compare on that basis. If you're holding a farm,

that basis. If you're holding a farm, >> same deal. Okay. Uh in other words, what is the yield on that farm from holding it?

>> Generally more than 4%.

>> No, I'm not getting into the specifics.

I'm getting into the mechanics. So when

looking at the markets as a whole, what I do is I just compare everything.

Right. Okay? Because all I want to do is I want to essentially borrow or be short >> those that will have the lower returns

relative to those that will have the higher returns. So it's constantly

higher returns. So it's constantly calculations in that way however you get there. And that's true of your farm as

there. And that's true of your farm as it is on the other. But I think that the farm or illquid assets should have to

give me a higher return because I'm not going to have the choice of easily selling that farm and buying that farm.

Whereas that choice that flexibility that liquidity >> but I'm talking about the public equity of a farm farming company.

>> Okay. Then you are dealing with the public liquidity. I didn't know that.

public liquidity. I didn't know that.

But yeah in terms of that. So then

there's no liquidity premium. Still that

same calculation. Okay. What is the yield and then what is the price change relative? What is that? That'll be my

relative? What is that? That'll be my return. And what is that relative to the

return. And what is that relative to the other things I could be in? And

basically you start to think when you think of leverage. You start to think uh okay it doesn't have to be about zero.

Zero means like no leverage. when you

start to think okay I can be if if the lesser returning asset can become a liability meaning I can

then borrow it and get higher here then I want to get that spread and that's how I think of the issue of using leverage

and then the issue is how do you deal with the risk but the ri the risk is not something that is that like zero leverage and it's a black and white

thing. It's a continuous thing. Look, I

thing. It's a continuous thing. Look, I

should say the following. There are two important ways to invent to invest.

Okay. The first is what if you can't beat the market?

>> Mhm.

>> Most people can't beat the market.

>> So when they start off, everything isn't a bet. It's like if I don't know what to

a bet. It's like if I don't know what to bet on, what is my portfolio? And so you should start with what is that mix of

assets if you're not a trader and so on.

um what is the right mix and that's for example why a lot of Indians hold gold or a lot of people hold gold they don't want to bet but they just saying that'll be a sold of wealth

>> once you have that portfolio that portfolio should be a well diversified portfolio that assumes you can't market time >> then there's the question can you market

time okay >> so you're asking me a market timing question I want to distinguish it I don't think most people should play a market timing question. And when you're

asking me my t market timing, I view that question with a lot of responsibility because maybe I'm right and maybe I'm wrong. I wanted to preface answering your question with that

explanation and then I'll go back to answering your question. I money is debt and debt is money. What I mean money So here's mechanics. You're holding a debt

here's mechanics. You're holding a debt instrument. What you're holding is a

instrument. What you're holding is a promise to deliver some money. Mhm.

>> And what that money is worth will determine what the value of what you're holding is. Okay. You're really you're

holding is. Okay. You're really you're holding when they hold that debt, you're holding money that if it's devalued, you're going to be sorry. Okay? And

money is debt. And what I mean by that, when you're holding your money, you're holding it in a debt instrument. So

money is debt and debt is money. And so

now I'm when I'm answering your question, to me there's too much debt and we're producing it too much. And so

when I'm looking at that and I'm looking at around the world and I'm not just looking at it in the United States, I'm looking at it in the UK and in France and in China and in most countries.

We're producing too much debt. That

means I don't want that kind of money.

So when because I don't want that kind of money, I look at well that's why I prefer and have been preferring the holding of gold to that kind of money. I

think when you think about your portfolio, you should start to think again if you don't have how any um what should you be holding? I think

individuals or if you look at the quality of money and like gold let's call it you want to stay I would say I want to stay out of fiat currencies and

I want to stay out of those things on a tactical bet not on the strategic asset allocation bet when I do that um I'm I think to myself um okay what should I

have and an individual and most investors should have between five and 15% of their portfolio in a a gold or an

alternative money. Now, it depends what

alternative money. Now, it depends what other assets they have in the portfolio.

>> Even if they're starting today to build a portfolio after the gold appreciation of the last year, I >> I think that they they have to stop even thinking about the appreciation and

market timing as a starting point. You

have to say what amount am I going to hold?

>> Okay, what is that right amount? and

it'll be beat. So the answer to the question is yes, forget about and we can get into the pricing of gold or what it might do and what it might not do. But

still you okay I need to hold that amount because that amount is the right amount. If you were to go through a

amount. If you were to go through a portfolio optimization and you were to say what um through a mechanical portfolio optimization and you say what

is my mix of assets to create the right portfolio. If you're holding stocks and

portfolio. If you're holding stocks and you're holding other assets because gold gold is over a period of time a lowturning asset class like cash. It'll

produce it has produced and for logical reasons it produces about a 1.2% a year real return. That's that's that's a low

real return. That's that's that's a low real return, but it is highly um diversifying because when the other parts of the portfolio do very badly,

let's say be because of certain things like we're talking about stagflation, you print money and all debt issues, then the gold does very well. So, it

also has a diversification benefit in terms of the portfolio. For those

reasons, it is the most fundamental money that we know of and it is at the same time an effective diversifier to

other things. That'll get you to that 50

other things. That'll get you to that 50 between five and 15% of the portfolio.

>> While we're speaking about currency, how do you view crypto and the world of Bitcoin?

>> Um, Bitcoin is limited in supply and its perception of money. It is a form of money. It it's perceived as money as a

money. It it's perceived as money as a storehold of wealth that is unlikely to be significantly held by central banks

and many others because of a number of problems it has. It can't transactions could all be followed in Bitcoin. One

can monitor what the transactions are.

governments can monitor what the transactions are and governments can interfere with those transactions just like we talked about earlier when we talked about you know gold is the only

asset that you can have that they can't uh mess with and control you've got it okay that's not true of Bitcoin and then there are other issues in Bitcoin like

if we talked about the possibility would somebody make uh synthetic gold like they would make um uh synthetic diamond

diamonds um as as a risk. Well, in terms of Bitcoin being cracked, broken, all sorts of things and controlled, it has those issues. Okay. So, that's how I

those issues. Okay. So, that's how I look at Bitcoin. You're not bullish.

>> I have a little No, no. I'm I'm bearish on fiat currencies >> and bearish on uh >> So, when I look at the world, I'm I'm just trying to say then I say, what do I hold?

>> Okay. So, I hold a little bit of Bitcoin. I have a little bit of Bitcoin,

Bitcoin. I have a little bit of Bitcoin, but for me, it's not as attractive as um uh gold for the reasons you asked me my thoughts. Those are my thoughts about

thoughts. Those are my thoughts about Bitcoin.

>> A stable coin um is attached to the fiat currency. So, it goes down like the fiat

currency. So, it goes down like the fiat currency goes down and it doesn't give an interest rate and and they're toying around with what whether it gives interest rates or not, but there's not a

model that I've seen. So, so far um it's used largely for immediate quick transactions and not a storehold of wealth but immediate quick transactions

and it may be an efficient way to have that but it's not my storehold of wealth yet I don't see the merit of it. So if I were to build your portfolio array of storehold of wealth, just that

component, let's say 5 to 15 goes to gold. How much goes to uh you said you

gold. How much goes to uh you said you have a little bitcoin. What percentage

would that be?

>> I'm not going to give you what I've got, but I'll give you just general guidelines. Um it depends on

guidelines. Um it depends on um the type of equities.

You you can't talk about equities as equities. Mhm.

equities. Mhm.

>> Because they're too divergent.

>> Mhm.

>> As we're seeing for example now, it's so contrary uh the magnificence of it and and AI and tech is such a dominant thing. So in order to think about

thing. So in order to think about portfolio construction, you have to think what type of equities, where do you hold those equities?

>> I'm not talking about equity. I'm

talking about the assets that you hold with relatively lower risk like gold and treasury and bitcoin which is not you taking a bet on a particular industry

but someplace to park money. What else

would you >> I see. In other words, you're you're not asking whether there's equities in the portfolio or bonds or what country or anything like that. You're just saying

that piece of equities. Okay. Then you

think about um that on that storehold of wealth, you start to think about what that nature of that thing is. There aren't many. Some

might say there are gems. Some might say there are works of art. I mean basically when they say these things they're going through criteria which is uh can I move

them around?

>> Um are they storeholds of wealth that are recognized in different places?

They're not like real estate. Real

estate is something that's nailed down in a location. It's easy to tax. It's

not transferable and so on. So, it's

the, you know, th those kinds of things, >> right? Do you think real estate should

>> right? Do you think real estate should be taxed? Like we have very low property

be taxed? Like we have very low property taxes.

>> I think I think what should be taxed?

I mean like if I was to create up priority list, first tax this, last tax this and so on. And I would say in real

estate, um I think there's the question of what does it mean for the economy or what does it mean for those who are being taxed or what does it mean for

those who are taxing? I think the practical aspect of real estate in terms of taxing is because the individual owner of real estate can't take it with

them. It is a very practical asset asset

them. It is a very practical asset asset to tax for the government >> because they they can always >> tax that and you can't take it with you

versus the other. So I think uh while uh you know what should be taxed is a dependent on who you're asking should it's a for the government it's a very

effective thing to tax for an individual um it's another in terms of its economic um impact I think it's fine to tax real estate there's nothing you got to tax

something I I think now do you want to have such a tax burd burden on any one thing that it's crushing to to the economy. Then just generally taxes I

economy. Then just generally taxes I would say you know I want to spread them out and then I would tax things that are harmful you know like um what I I don't

know if they call them sin taxes. Okay.

If I don't know maybe cigarettes or you know um I don't know those things or and then some things that are harmful and you the least things you would tax are those things that are helpful.

>> Yeah. I make a case for taxing real estate because I think a lot of the benefits of corruption and the bad money, the black money in a way sits in

real estate and that might be a good way to bring it into the tax system.

>> Okay.

>> Personally, if you go back to your life, you spoke about going to college after you began trading, after you were a caddy and after.

Do you think there are roles today like the role of a caddy where you work around influential people and you can learn by virtue of being in their proximity?

>> It's always it's always of course great to be about around smart people if they don't want to be an entrepreneur whatever it is uh be around a smart entrepreneur and talk. Yeah, that's

great. Sure.

>> What was caddy the job of a caddy back then? What do you think it would be

then? What do you think it would be today?

>> Well, they do the same. And they can't they carry bags or they put them on golf carts and but they walk there and it if you're walking with people who are it's an entrepreneur or if you were a

physicist and you're walking with want to be a physicist and you're talking with a physicist >> any suggestion of other jobs like the caddy job today cuz >> whatever gets what whatever gets you two

things I'd suggest >> first play the game if you have an opportunity to play the game you can play the Well, the one of the beauties

of the markets is it doesn't take a big portfolio to play the game. I I had $50.

I went into the game and I and because the market pieces can be broken up into small sizes. You can almost play the

small sizes. You can almost play the game the same as a huge investor can play the game. Ease of access, you've got that in terms of those. So, the game

that you get into at an early age will influence you a lot. If I look at um like age 12, I'll give you that example.

There's some people who say the psychologists will say prior to 12 people learn differently um because puberty at the age of puberty prior to

that you learn if you're learning a language or learning a sport or learning things. Anyway, the earlier you start

things. Anyway, the earlier you start learning the better it is, the more internal learning that you have. And so

play play the game, whatever it is. Bill

Gates um and a lot of uh the you know key tech people like to play gaming.

They were in gaming and they would hack the games and they would play in the computer and that'll affect them. So

play the game, find a game that you love and ideally one that makes money. Wow.

If you can do those two things together, that's a terrific thing. Play the game and then be around people who are pros at playing the game so you can chat

about it. That's a good path.

about it. That's a good path.

>> Leverage in speculation, especially around equity markets.

Across the world, many people seem to be coming down on qualify a investor more before you allow him to speculate, buy futures or options. U

do you think that should happen or should a young kid who's 18 and has that $50 be allowed to speculate?

These are questions about I mean they're they're broader questions about um being taken advantage financially versus

learning experiences. I I don't mind any

learning experiences. I I don't mind any kind of risk something that becomes a tolerable amount of risk. That's

different from exploitation. Okay. And

so, um, I think that it's incumbent, it should be incumbent on anybody who's selling any investment product to be, uh, dealing with it at a certain age to

be thinking about am I exploiting that person or not. Okay. So, that's but that's a balance for regulators to deal with, >> right?

>> Uh, do you have a view on uh, prediction markets? Like I know Shane Shane

markets? Like I know Shane Shane >> I like them. I like them.

>> Yeah.

>> Yeah.

>> Shane and Taric are friends of mine. and

they both live in New York. Kalshi and

uh poly market u in the future does a lot of what is happening on stock markets move there cuz you can speculate

on just about anything >> mostly different act events to bet on and I think events affect companies but

they're two different things so I would say um it'll be something to speculate on um but and It' be something that

smart people may use as a hedging device against owning an equity. Like if this event happens, that event that you can speculate on, and that might have an

adverse effect to the stock I'm holding, there'll be all sorts of engineering and so on. I would imagine you'd see

so on. I would imagine you'd see something like that happening. Um, but

uh, we'll see, you know.

>> So, you would use it like a leading indicator to make stock decisions.

>> I not a leading indicator. I wouldn't

view it as a leading indicator. I mean,

you might think about it. It gives you information, but um uh it's a vehicle to speculate. It's a vehicle to use to

speculate. It's a vehicle to use to hedge. Um it gives you some notion of

hedge. Um it gives you some notion of what those who are, uh speculating on it, um is there are certain things that I'd like to try to get across here in our interview that I'd like to, you

know, what what is the difference between wealth and money? Mhm.

>> There's certain things that if I can get across to your audience, I'd like to get across.

>> Yeah. Do you want to go wealth and money first?

>> Okay.

>> Yeah.

>> Bubbles and wealth and money.

>> People are not used to dealing with the difference in them and it's very important. Wealth can easily be created

important. Wealth can easily be created the way we account for wealth. For

example, if you're you start a company and let's say you want to make a unicorn, you sell $50 million worth of it. You

value it at a billion dollar. You're now

a billionaire and it counts in wealth as a billion dollars and there's but nobody would pay a billion dollars for that issue combined. Okay? And that's a lot

issue combined. Okay? And that's a lot of what's happening now with wealth and and and if you look at the 1920s bubbles or you look at those what you see in one

way or another is that wealth goes up and people feel wealthy but the wealth isn't worth anything if you don't sell

it convert it into money to spend.

Right? So people should know that okay that when they have this wealth they perceive they have the wealth and so on you it's not worth anything unless you

can uh convert it into money and spend it other than it's utilitarian value but it's not worth what it what it is and that's how bubbles are created the mechanics of how that bubbles are

created in one way or another that happens okay then there comes along the need for money so what happened and how does that work for one reason or

another. Somebody's got to get that

another. Somebody's got to get that money that money who and they have wealth. So they sell wealth in order to

wealth. So they sell wealth in order to get money and then the bubble comes down. So if you look at the 20s and

down. So if you look at the 20s and there or you look at any of the bubbles, the Japanese bubble or you look at the 2000 bubble and so on, you can see this

dynamic because it can be created without money. Money is the means that

without money. Money is the means that settles transactions. It's very

settles transactions. It's very different from credit. Okay? When you

get credit to buy something, um you have an obligation to deliver money. But when

you get money and you buy something, you have no obligation to deliver anything.

You've paid for it. You've settled your transaction. So now when I when we look

transaction. So now when I when we look at this, we have right now a very high ratio of wealth to money. And this is

particularly important now. Okay. And

there's a and we have a very large also wealth gaps and values gaps. But when

you have such a large wealth gap and and you have populism of the left and the right and so on and you have the notion of wealth taxes, you can have wealth tax

as wealth taxes come in. What? And and

the wealth is so large relative to the money. um if you're not taxing wealth uh

money. um if you're not taxing wealth uh wealth then people can get very wealthy and no money can be raised for for the taxes. So there's a real pressure to tax

taxes. So there's a real pressure to tax wealth and if you tax wealth then people have to sell in order to get the money to pay the taxes and that creates a

dynamic that can pop a bubble. So in my opinion, we're in a bubble, okay, by various measures of it being in a bubble and uh and people feeling very wealthy,

but you have that vulnerability. So that

is largely the dynamic of when we see these wealth booms and then the wealth bumps. I wanted to convey that. Okay. So

bumps. I wanted to convey that. Okay. So

that's the first thing I want to convey.

>> Is there a way to calculate wealth to money ratio which you >> Yes, I do. I do. Right. wealth to money ratio right now in the United States is

about 8 12:1 and and so on and when you look at it um and then also then there's what it's in the stock market um is is

right now about 3 to one and uh and that's very high if you were to go back to 1929 or 2000 it's at about the same

level uh as it was in those times >> is it higher today than 2008 and 2000 >> well 2000 2000 was the peak.

>> Mhm. How much was it?

>> Uh same same as today. The same same uh same levels. If you take 1929, 2000 and

same levels. If you take 1929, 2000 and now it's all right now. If you look at that chart, you can you can see that

chart. So, um we have a lot of wealth

chart. So, um we have a lot of wealth and a lot of equity wealth relative to money. Do you think it could be possible

money. Do you think it could be possible that tomorrow wealth tax is collected in equity and not money?

>> No. Because they have to spend it and they have to pay it. In other words, the liability that it's going to fund can't be paid by I'm going to give you a piece of my farmland. You know, you get a

piece of the farmland.

>> The government gets a piece of the farmland.

>> Yeah, that's what you're suggesting. I

don't think that's realistic. You get a piece of the farmland, >> right?

>> Okay. You're not going to feed people in inner cities with a piece of the farmland, >> right? If that were to happen, people

>> right? If that were to happen, people will have lesser incentive to work on the farm cuz eventually the government will own too much.

>> I don't think so. Um, so I want to talk about the five big forces that that drive things. Yeah. If I can. Um, first

drive things. Yeah. If I can. Um, first

there is a debt, money, economy, markets dynamic. Credit creates buying but it

dynamic. Credit creates buying but it creates debt. And when it creates debt,

creates debt. And when it creates debt, there's an obligation to pay back. And

then the and and so how that dynamic works. The second big force happens

works. The second big force happens simultaneously is the internal political force. You experience it India, every

force. You experience it India, every country does, we experience here.

There's an element here of that political force that there is left and right. In other words, the rich and the

right. In other words, the rich and the poor and the conflict and how to run a country and so on. So that political force and there's a cycle uh just as

there's a debt cycle that means that you cannot increase your debt past a certain point and that changes that monetary order cycle lasts something like a

lifetime. Um and that that's the debt

lifetime. Um and that that's the debt cycle. There is a political cycle that

cycle. There is a political cycle that goes with that that has the left and the right and the political and we are in the middle of that. So the nature of our

governance system and the nature of democracy, the risk of do you we're past the point of um saying that we'll abide

by the rules. Okay, it's a it that when you have populism of both sides, it's a win at all cost type of approach. Will

you accept election results? Can you can the government compromise? Can it govern in that way? That political cycle is number two and it matters a lot that all

these cycles relate to each other.

Number three is the geopolitical order, the world order. In other words, we came out of 1945. You come out of the you end

a war and then the dominant powers determine how the world order works, how who has what power, what the rules are.

that was dominated by the United States because of the power it had and then you have changes in relative power the emergence of China the um relative

decline of the United States India's role and other places role that world order has changed that world order has gone from a world order that it was a

multilateral world order sort of with rules like the United Nations and the world trade organization and the world uh health organization and the world

this is you know the world bank and the world this and the world that in terms of multilateral governance and that is over. Okay. So we no longer have that

over. Okay. So we no longer have that kind of a world order. We have a world order which is dominated by uh power power struggles and as we deal with

that. So those three cycles, that money

that. So those three cycles, that money cycle, that debt money cycle, that internal order and disorder cycle, that international world order cycle, they

tend to coincide. And throughout

history, when you have that that convergence, you almost have a perfect storm of that. The fourth influence through time has been climate um acts of nature. Droughts, floods, and pandemics

nature. Droughts, floods, and pandemics have killed more people than wars and changed more orders. And number five always through history is man's inventiveness particularly of new

technologies. So everything that we're

technologies. So everything that we're we would ever talk about in the markets in the economy will fall under those things practically everything. And it's

the inter relationship of those things and the arc through history that one needs to see in order to understand what's going on. So my basic view is

that there are many things that happen over and over through history that haven't happened in our lifetimes that are very educational, very valuable in

being making decisions.

>> I'm going to ask you a question Ray. How

does a youngster, this is a very candid, pragmatic question. How does a youngster

pragmatic question. How does a youngster in India who's 25 years old say his name is Nikil and he's living in India in Bombay

u how does he make money using all this information and framework cuz that's his objective play the game >> how do I use this information to play

the game better I I think I think there's cerebral learning and there's visceral learning you know and um so I can tell we could talk like this, but we

are it's a different thing. Once you

start to get into playing the game, whatever the game is, little entrepreneur on um street corner selling something. Okay, that's you play the

something. Okay, that's you play the money game.

>> Okay, whatever way you play the money game. Maybe it's in the public markets,

game. Maybe it's in the public markets, maybe it's in you buy a little piece of real estate or you have a hot dog stand.

I don't know what it is, but you play the game. And as you start to play the

the game. And as you start to play the game, you'll start to learn the fundamentals of the game. You, and we talked about this, be around people who also play the game. So while you're

playing it, and you will learn through your experiences and your reflections and the help of other people.

I think everybody wants to play the game and they're attempting to play the game.

But what would be really cool is if we can get an insight from you of how to play the game. Like if I were to be looking to begin today, should I look at is value in public markets, in private

markets? Should I be

markets? Should I be >> I I I I think it's more like the opposite. What happens is

opposite. What happens is you find your thing.

>> Okay. There are many different games.

Look, if you look around you, there are many different games. You know, it's um I have my grandchildren um sell um hot

cider in the winter in a park and then what and then they understand capital formation. I have to buy the f the the

formation. I have to buy the f the the flask. I have to buy the table. Okay,

flask. I have to buy the table. Okay,

that's capital formation. Then they

understand when they go out that okay if I can uh produce it what's my incremental cost unit cost for producing it relative to I I could sell it at this

I have a margin of this then they understand margin and then they understand that they make money when that overcomes their capital cost okay

the playing the game they start to think about that way then they start speaking with others gee can I where can I get the cider cheaper or whatever and and so

on. So there are all these games around

on. So there are all these games around you, okay? And start to play. Then

you, okay? And start to play. Then

you'll ask the questions, then you'll dig and so on. Uh or yeah, you can find somebody or help you. They might say, "Hey, here's this little job that you

can do." Whatever it is, it is that

can do." Whatever it is, it is that little germination that then creates um mo empires that that that's the

process of going from wherever you are in India to or wherever you are for me catting on a golf course in the United States that's the process that allows

that to grow and develop over a period of time. It's very helpful to understand

of time. It's very helpful to understand your nature. Okay, people have different

your nature. Okay, people have different pulls. Some people are more riskaverse.

pulls. Some people are more riskaverse.

Some people like to pay attention to the big picture. Others

big picture. Others will handle risk. Others will pay attention to the details. What is your

nature? So I created online, it's free

nature? So I created online, it's free online a test called principles you. I

recommend you take it. everybody take it and they'll look at you and through answering questions you'll learn about yourself and if you also have other people that you know you have

relationships you'll look at them to help to identify their nature what is their inclinations and I think that what what really is the journey in life is to

try to know about your nature and find it connection to the right path right so there are many right paths for all your audience I want you to know your nature

and try to match it up with what the right path is for you.

>> Um, for the trader in me, uh, if I were to go back in time and be 18 years old again, if I were to specifically ask you,

you you model people a lot in the sense that you psychoanalyze them. You let you have them go through different kind of testing to figure out what psychology is suited to what. What works for a trader,

Ray? What makes a trader successful?

Ray? What makes a trader successful?

>> There are many way when when you use the word trader, it has an implication of a certain way of operating that may that is only a small percentage of the total

way of investing. Right? So, uh it's the person who um the it could be buys this from here and sells it from here. It

could be the form of you know you buy a bracelet here and you sell a bracelet here and you do it or it could be a stock trader and so on so forth and that implies like buy sell and so on. There

are many other ways. I think you have to if you're understanding let's say investing then you have to understand the various ways of converting one thing to another thing and making a profit and

that's why I give the example of the cider case and and so on uh for being able to do that. Uh a trader I say think

biases it too much to the guy who's flipping. But I think for this example,

flipping. But I think for this example, let's say what is the archetype of a trader, bar, investor that would help him succeed psychologic.

>> First, you're going to go into it and you're going to get hooked on it like getting hooked on a game. Okay? And you're not going to know anything. And then through

those experiences, what you need to do is be curious to understand mechanics.

Okay? What are the cause effect relationships? What are the things that

relationships? What are the things that make the market go up or down so that you can in whatever it is whether you're a day trader or whether you're investor you have to get into the mechanics and

you have to learn the mechanics right and through that experience and you if you think and you're curious and you could research then you can do that. I

am creating a platform that anybody can use to help them do that. In other

words, there's information and the way you make decisions is your brain brings in information and it puts it through

criteria that determine action. Okay,

that's how the brain works. That's all

the decisions. And so you have to learn what are uh what is the criteria that are and the criteria is cause effect

relationships because causes happen before effects. And if you understand

before effects. And if you understand cause effect relationships and you understand the causes, you can bet on the effects that it will be have

happening from that. So you have to be curious and you have to be analytical to understand those cause effect relationships. You begin a journey.

relationships. You begin a journey.

Okay? Because if you're just gambling and you don't understand the cause, you won't have an edge. You need to have an edge. Okay? And that is by knowing those

edge. Okay? And that is by knowing those cause effect relationships and playing your bet and how to organize your bets so that there's a diversified group of bets because the power of

diversification means that you can greatly reduce risk without reducing returns.

>> Right? What else do we have? Curiosity

understanding cause effect relationship then >> on uh being addicted to the game and getting the best guidance you can get.

>> Right? How does one get guidance?

Oh, guidance is all around you. I'm part

of the guidance here today. There are

courses you can take. Okay. Once you

have the curiosity, >> then you will dig and you will learn and you will experiment.

>> Is that what worked for you? You still

>> you still come across as a very curious person. It almost feels like you're

person. It almost feels like you're trying to answer the question of life.

>> Yeah.

>> That can't be answered in a way. I I'm

learning more every day, >> right?

>> And I can't answer it all understand it all, but I I understand a lot more and I get a kick out of it. You know, um Albert Einstein supposedly on his

deathbed was still trying to figure out problems. Um I can imagine me doing that because I love the problems and like to learn, you know. Um, so yes, I have that

addiction to learning and and then uh one of the great things about this game is you bet on it and you get a score. So

you you can measure my performance down to three decimal places and so on. Yeah.

>> Has this taken a lot of time changing world order, the research, the amount of effort that >> Yes. But it's a passion,

>> Yes. But it's a passion, >> right? What do you hope to achieve at

>> right? What do you hope to achieve at the other end? for me now.

>> Yeah.

>> My main thing is can I pass it along?

I've got a journey and I learn and I love it and and all of that, but so it's still a passion. But what I'm really also trying to do as I approach this

stage in life is to pass it along. I

think there are three stages for me.

There are three stages in life. There's

the first stage where you're dependent on others and you're learning. You go to school, you're not really doing it.

You're just learning right and and you have that dependency. Second stage is you begin the second phase of life very different stage is you're working and

you're trying to be successful and others become dependent on you and in that phase you're dealing with the real world in terms of being able to do it.

It's no longer academic >> and then you and you have your career and I started Bridgewater um largest hedge fund in the world. I started uh

the two-bedroom apartment. I ran it for 50 years and I'm then I passed it along.

Okay. Wow. What a great journey and I learned a lot. Okay. But now I'm at a phase in my life where what I want to do I'm in the transition to my third phase.

And this in this transition I think that there's an instinctual uh desire to pass along what you've learned to mentor. Why am I doing your show? Okay. Because I have that desire.

show? Okay. Because I have that desire.

So that's what's important to me.

>> And why do you have that desire? I'm

just asking you.

>> I think it's instinctual and it's intellectual. It's instinctual almost.

intellectual. It's instinctual almost.

Um we learn uh you know man's subliminal understanding goes back millions of years even though man only was 250,000

years old and so on because of what becomes why do we love our raise our children? Why do we do many things? It's

children? Why do we do many things? It's

sub there's a lot of subliminal things that enter into why we do things. Uh and

and then there's and it's intellectual.

What do I want to do? It's the most valuable thing I can do. Um karma. Okay.

Karma. What goes around comes around. In

other words, that notion that so I I believe it, I feel it, and I want to do that. So, it's both intellectual and

that. So, it's both intellectual and emotional.

>> You've spoken about karma and meditation and Does that play a role in your investor career? It makes you a better investor.

career? It makes you a better investor.

Oh, >> it's a it's a these are dominant things.

Meditation has been the biggest source of success that I um have. It's given me an equinimity. It's given me um when you

an equinimity. It's given me um when you transcend, I do transcendal meditation this and that. When you transcend, you're going into your subconscious. And

as you go into your subconscious, it helps align your subconscious with your conscious it brings back a creativity bring back a flow because like

creativity if you go take a hot shower and you you're relaxed and so on ideas can come to you not much better perhaps than if you try to muscle them out. So

meditation has played an important role and then karma I I I believe in the the reality

is um is that um by people mutually helping each other or and not just people but operating in a way that's also helpful to nature and the world

that there is this greater um there's this greater good and that what happens is it's very functional because a little things that won't take much for me to

help somebody else can make a life difference to them and then they um when they do something whether it's to me or whether others you create an environment

like that you create a better environment. So not only is it practical

environment. So not only is it practical it also has the effect of creating this wonderful uh environment. um that you look at um studies of history and you

find in studies of history uh what brings about happiness and health past a certain amount of money uh of basic subsistence life there's no correlation

between the amount of money you have and the amount of health happiness you have.

Um the greatest source of uh health happiness excuse me across uh societies is community. if you have a good

is community. if you have a good community and that's that's a source of helping it and well-being. So I think that these are laws of nature and

they're just reality when I look at them that way. So yes, your your question was

that way. So yes, your your question was does meditation and karma play a role and it plays a role in everything. Yeah.

>> You spoke about community ray you're spending time in Abu Dhabi for example.

U how do you find that place culturally?

>> Oh I love it. I uh I uh I uh I started going there uh 32 years ago um because their large wealth fund uh hired me and

I Bridgewater as an an investment. I

think that they understand karma. Um

each society has may call it different things and so on but they understand um the most important things and I'll and

I'll to create a a a successful society.

What it is required to to create a successful society is basically three things. If you do this well then you

things. If you do this well then you have a successful society. The first is teach your children, educate your

children well so that they are capable of uh succeeding, earning money and so on and living a life and also that uh

they're civil, >> they understand civility.

Have them come out to a civil society in which people work well together to make good things happen.

and stay out of wars. Stay out of a domestic war and stay out of an international war. If you do those three

international war. If you do those three things, well, you will have a successful society.

Okay. So now if when I look at the the places you could almost look at that is is there harmony?

Is there do you educate the children well? And and do you have broad-based

well? And and do you have broad-based prosperity?

In other words, that it works well for most people, right?

These are these are fundamentals. And

so, um, in the Gulf countries, uh, particularly Abu Dhabi or the UAE and Saudi Arabia and so on, even there's a bedawin culture and so on that has

elements, uh, a lot of elements in in those things. It exists in other places

those things. It exists in other places in in various places.

success is their version of it. If you

go to um Asia and and you go to Singapore, you go to China, they do it in their confusion way. Okay, in terms of harmony, how do you do harmony or

what is common prosperity? How do I um make it that most people are benefiting and that if you look at the accomplishments within India in terms of the development and and so when I say

that civility certain basics do you earn more than you spend do you have a good income statement and a good balance sheet

okay these are basics you have these basics you will have a successful not I'm not saying not challenging but you'll have a successful life and you

have a successful society.

>> You've had a very eclectic experience in terms of China, Russia, Abu Dhabi, Saudi. Uh how are they like

Saudi. Uh how are they like how are these people to talk to or can you tell us something about them?

>> Well, the best uh um the best leaders are reflective.

They go above it.

It being how the world evolves, where they are in the cycles.

They understand human nature and they care deeply about uh the well-being of their people and they're practical

that those are, you know, the characteristics. So we have

characteristics. So we have conversations that are quite like this and then you get into this particular like what to do you know that you know

how do you deal with the conflict okay so there's the conflict and like a a general rule um be neutral

okay because if you look at the history of wars and so on there are winners of the wars losers of the wars

and neutral country countries.

The winners of the wars lose, meaning they still get deeper in debt and they have the consequences of the wars. The losers of the wars get wiped

wars. The losers of the wars get wiped out. They lose everything. And the

out. They lose everything. And the

neutral countries prosper from the wars.

Even that's how they accumulate money and they don't have that problem. And so

it's it's always better to operate that way. Now if you look at history and you

way. Now if you look at history and you then say we apply it today.

>> Okay. So the conversations are like that.

>> You've liked China for many years. I

think one of your kids went to live in China. How do you see the global dynamic

China. How do you see the global dynamic playing out between China, America, Russia, maybe you can opine on India as well.

>> What do you think will happen next?

>> Now we have the changing world order.

the United States and other countries have a different mentality about fighting and so on so forth. There may

be that dynamic. So now you have a great the change what power matters power in all of this not it's not the rules of the game it's not etiquette it is power

matters and that is the dynamic that we have what's most important is how healthy the country is each country more important than the international if

you're strong you're strong and that's the most so be strong and healthy and so there uh the United States is going through its challenges we could we talked about that. We could talk about

that more. And then the and then uh

that more. And then the and then uh China is going through its challenges.

India is going through its challenges.

But how it goes through those challenges to do the things that I just said are effective to make an effective country is the most important thing. So I don't

think we're going to there is a greater risk that we can have um I'll say military war. We are certainly in the

military war. We are certainly in the classic wars that happened before a military war. We're in a trade war.

military war. We're in a trade war.

We're in a technology war. We're in a geopolitical influence war. All of those are in that and that's the dynamic that's happening. If you're asking me uh

that's happening. If you're asking me uh what it means, I think that it's probably that they're not it's lower risk of, you know, a big it can happen.

You have to be careful. But um I think then it's how each country takes care of their own and becomes strong and healthy that matters most. And how do you think

the dynamics between them will change?

If I were to get more specific as a proportion of world trade, who will do better? Will it be 10 years forward?

better? Will it be 10 years forward?

Will it be China or the US?

>> I think >> and also how does India fit into this?

What can we do better?

>> Um I think the technology war is the most important war that almost whoever wins

the technology war will win almost everything. I think that right now you

everything. I think that right now you have a situation where they recognize that the each side can do harm to them

and actually is using techniques and so there we're now in a period of time of inter eliminate or reduce interdependencies that there's a list that both countries

or all countries are going on and they say how can I squeeze the other what dependency do they have that I can use to squeeze the other or what dependency

do I have that might be used against me to create squeezes and that's in capital as well as trade and so on. So

everybody's now going to kind of this independence and you know minimizing interdependence because that's the smart thing to do whatever because I will be

squeezed if I can be it'll be used against me. So that's where we are on

against me. So that's where we are on that and then compete to become most effective most powerful most rich most powerful they're both doing that and

technology will be important. So I think that over those periods of time you're going to see um that dynamic. Um I think

China um they're ahead and behind in different ways. Um for example, the

different ways. Um for example, the inventiveness of new chips um and the most advanced chips. Um the United

States is a bit ahead is is ahead. Um

and then uh but the application to use the chips whatever AI there is to be able to integrate it into life and making it for the society most

applications and most effect China's ahead. I think that um India is um at a

ahead. I think that um India is um at a wonderful um arc in terms of um its circumstances,

its potential and and what and what it's developing. And I think that um uh

developing. And I think that um uh President Modi is very much like uh Deng Xiaoping for China. Um and what I mean

by that is that um he's creating changes and when you are have a country that um can build its infrastructure and can build on that so that you and you don't

have much debt and you have a large talented population in many ways um that um um for these reasons I have um I've

created a u indicators leading indicators of what countries ries have their ingredients to project the next 10 years growth rate. India is best India

is going to have probably the has the best fundamentals to have the best growth rate in that because you're going from not having enough money to having that has infrastructure. You have to

build infrastructure. When you're

build infrastructure. When you're building infrastructure, when you're creating this the things that are happening in in the not only um all the different infrastructure including the

ability to get credit and the ability to do transactions and so on um in that that produces a growth curve particularly if you don't have very much

debt um and you have talented people. So

I for those reasons I think India over the next 10 years has all the ingredients to really be the strongest growth rate and and improvement.

However, it's it still has development to do. It is more akin to where China

to do. It is more akin to where China was um you know uh 30 years ago maybe than where um China is today. So it has

that that growth. it the actual power of it is not as great as the uh those other two countries.

>> Ry, I'm going to ask you the last question of today. If you were 25 years old and in India and you had either $100 to

if you had $100 to invest somewhere, where would you put the money? The first

thing I would do um is ask myself what do I need most to be most successful and I would secure

that right it's not just return on investment does that mean that I can take a little bit of that $100 and I could start my little business or do I

secure that $100 to have my education that I'm being able to operate whatever is going to as a young person invest in

their own success to be able to learn.

Do I how do I learn? Do I listen to your podcast? What is it that is going to

podcast? What is it that is going to allow me as that young person to be able to invest in myself and learn and get better? So, that's the most important

better? So, that's the most important thing. That's the best investment I can

thing. That's the best investment I can make.

>> Super. Any last words for our audience?

>> No, just thank you. Um I would say if you are interested in staying in touch

um you can uh do that online um through LinkedIn and various uh media. Um and

it's my pleasure. Thank you. Thank um

them to be able to communicate this way and I hope it's of some use.

>> Thank you. I hope you come visit India someday soon.

>> I look forward to it.

>> Thank you so much.