0:03

Welcome to Macquhive Conversations with

0:05

Balal Hafiz. Macquive uses natural

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Bloomberg for more details. Now, on to

1:00

this episode's guest, Thomas this episode's

1:02

guest, is a portfolio manager at Thomas is

1:04

a portfolio manager at focused investment management

1:06

investment management firm. of He

1:08

has over 25 years of experience

1:10

in mining investments, including as

1:12

a portfolio manager for commodity strategies at

1:14

at Dorian Capital, portfolio manager

1:16

at and Ou, and a and a

1:18

commodity at at Roundtable Investment Management.

1:20

He host of the tyranny today podcast and

1:23

also fluent in in languages.

1:25

I should also add that in

1:27

our conversation, we We it

1:29

on on the of December. December. events

1:31

have in in the

1:33

Middle East and we don't capture those

1:35

events onto our onto our conversation. and

1:38

welcome Thomas. It's welcome, Thomas. It's fantastic

1:40

to have you on the podcast show.

1:42

for for having me. a It's a pleasure

1:44

to be here. here. Now, before we go

1:46

into the heart of our conversation, I

1:48

do like to ask all of my

1:50

guests something about origin story. So it it'd be

1:52

great to hear from you and your

1:54

own words words what you you at university and it

1:56

inevitable you'd end up in finance finance

1:58

with this larger focus on on geopolitics. geoeconomics

2:00

and so on. Okay, so it's

2:02

a long series of all the

2:04

roads lead to finance, right? Hopefully

2:06

not all the roads, and mine

2:08

was a bit of a zigzag.

2:10

I started studying what I actually

2:12

wanted to study, which was, believe

2:14

it or not, cognitive semantics, cognitive

2:16

sciences. And then I quickly found

2:18

out that I had to study

2:20

something to get a job, and

2:22

that was economics and MPA. upon

2:25

which I landed my first job

2:27

and that sent me actually to

2:29

an industry, a mining industry and

2:31

this in the mining industry that

2:33

I connected with the financial market

2:35

for the first time and then

2:37

as it often happens through us

2:39

Moses started kind of gravitating did

2:41

my CFA and joined the first

2:43

hedge fund and I've been managing

2:45

books for hedge funds and family

2:47

offices ever since but specifically focusing

2:49

on mining and commodities and mining

2:51

equities and this sort of sub

2:53

universe. So a lot of macro

2:55

overlay as it is commodity markets,

2:57

so interest rates matter and currencies

2:59

matter, but the real stuff, the

3:01

real stuff behind is the value

3:03

generation matters a lot more. And

3:05

so that's the approach. Okay, that's

3:07

fantastic. And it's through a podcast

3:09

of your own, called tyranny now,

3:11

that I learned about your thinking

3:13

and how you look at the

3:15

world. And I found it very,

3:17

very original, the way you look

3:20

at geo policy, exeo strategy, and

3:22

so on. So hence, inviting you

3:24

onto the podcast. So now I

3:26

can see you have a commodities

3:28

background that necessarily forces you to

3:30

really have your finger on the

3:32

pulse in terms of global events.

3:34

Yeah, it's very global. So anybody

3:36

who's interested in the world more

3:38

broadly than just a couple of

3:40

major capitals should touch exactly that

3:42

area of commodities because it takes

3:44

you out of your comfort zone

3:46

to regions and jurisdictions that you

3:48

would otherwise never visit, right? Not

3:50

even as a tourist. And so

3:52

you learn how business functions in

3:54

those places, how people function, what's

3:56

the economic behavior of different groups

3:58

and different parts of a world.

4:00

And it's very enriching because one

4:02

risk that I always see in

4:04

our industry among people who do

4:06

not have that access is that

4:08

their world becomes flat. flat through

4:10

the Bloomberg screen. And that's unhelpful

4:12

because you don't actually realize what

4:15

the value creation is behind with

4:17

real people actually doing. So I

4:19

think commodity business is one of

4:21

those that you have that opportunity

4:23

to reach out both vertically and

4:25

horizontally and kind of deepen the

4:27

view beyond this quiggle that we

4:29

see on our Bloomberg screens every

4:31

day. And I noticed that you're

4:33

very well-traveled as well. You tend

4:35

to go into the field. So

4:37

to speak, you tend to look

4:39

at local sources of information as

4:41

well, not just the traditional kind

4:43

of Western media outlets and so

4:45

on to together your insights and

4:47

information. Yeah, that's almost inevitable in

4:49

this space. The difference between commodity

4:51

business or at least, I say,

4:53

minerals and fossil fuels is that

4:55

they are where they are, you

4:57

know, regardless of what the, human

4:59

construction is above ground. So you

5:01

have to actually go to those

5:03

places to understand what's going on,

5:05

to understand the operational excellence. So

5:07

like there are all the risks

5:09

that have to overlay the future

5:12

cash flow projections and so on.

5:14

It's almost inevitable. It's slowed down

5:16

since COVID, I'd say the world

5:18

is a bit different. There also

5:20

has shrunken quite a lot in

5:22

terms of what's available. And when

5:24

I think about. the past how

5:26

much time I spent in West

5:28

Africa and elsewhere. Well, it's a

5:30

tricky place to go right now

5:32

and a lot more countries are

5:34

in a stage of war, internal

5:36

conflict and so on that ever

5:38

before. So, and many of those

5:40

conflicts have also this sort of

5:42

more global extension. So you have

5:44

to kind of find out, you

5:46

know, what different forces are to

5:48

pull in different directions in this

5:50

post globalized world. So things got

5:52

a little more complicated. The market

5:54

is more fragmented and some of

5:56

the commodity markets are going in

5:58

the direction of almost semiconductors. So

6:00

a very clear bifurcation between East

6:02

and West, whereas in semiconductors, definitely

6:04

the weight, the gravities on the

6:07

Western side of the divide. So

6:09

say US, Taiwan, Korea, Japan, the

6:11

Netherlands. On the commodity side, especially

6:13

in critical mineral space, which are

6:15

absolutely necessary for new technologies. in

6:17

energy transition and defense. The power

6:19

is on the other side. So

6:21

it's China and Russia and often

6:23

their allies, you know, from Myanmar

6:25

to Venezuela. So it's also a

6:27

world that's being fragmented increasingly and

6:29

you have to actually adopt your

6:31

thinking. It's no longer a sort

6:33

of global thing where back in

6:35

a day I could go to,

6:37

you know, a hundred different jurisdictions.

6:39

Right now when I look at

6:41

my portfolio, it's five or six,

6:43

you know, you're very selective to

6:45

reduce the potential risk of the

6:47

unpredictability. and there's so much unpredictable

6:49

in the stuff that's in the

6:51

ground you don't want to compound

6:53

it with stuff that's above the

6:55

ground. Okay that's fantastic yeah so

6:57

I want to know to focus

6:59

on geo politics you know from

7:02

your perspective let's start with Trump

7:04

you know he obviously won the

7:06

election second administration you know he

7:08

obviously has a certain way of

7:10

relating to the rest of the

7:12

world you know one is the

7:14

tariffs he seems to imply he's

7:16

more of an isolationist or less

7:18

inclined to use war or military

7:20

to gain advantage abroad but you

7:22

know what's your thoughts on how

7:24

he'll make a difference to US

7:26

foreign policy or how should we

7:28

think about like a change in

7:30

administration in the US? So I

7:32

give you a grid that I

7:34

use for that, which is very

7:36

simple because it comes from linear

7:38

algebra. If you look at what

7:40

drives the different change of situations

7:42

and pressures in the global political

7:44

marketplace, there are three things. One

7:46

is the structure, it's the pre-existing

7:48

structure that exists both the national

7:50

and international. The second is the

7:52

agency of leaders. And the third

7:54

one is the sort of random

7:57

error, right? The contingency that you

7:59

cannot really predict. And so if

8:01

you look at what we know

8:03

so far with the first appointment

8:05

of the incoming administration, you know,

8:07

it's going to be less of

8:09

a structure or some destruction of

8:11

the structure. It's going to be

8:13

a lot of agency, think just

8:15

in Trudeau, flying tomorrow, like the

8:17

other day, flying tomorrow, like, the

8:19

other day, just four days after

8:21

President Alex's recent tweet that affected

8:23

both Mexico and Canada. And the

8:25

random error is what it is.

8:27

But so we have to focus

8:29

on this agency side. from deep

8:31

state. But on the edge of

8:33

the side, it's really interesting, because

8:35

that's exactly where your question could

8:37

be directed, is like, what does

8:39

it mean? What does preferences actually

8:41

mean? And there are two ways

8:43

to look at it. One is,

8:45

of course, that this is purely

8:47

transactional, that everything is what, you

8:49

know, Max Febe, I would call

8:51

it Seve, Ratzionet, right? So just

8:54

basically, there's some goal and goes

8:56

in this direction, either on trade

8:58

or security or security or anything

9:00

else. But that should not preclude

9:02

a conjecture that there is also

9:04

some ideological side to this, something

9:06

that the president elect deeply believes

9:08

in. And if you look at

9:10

his past statements, and that goes

9:12

back to that case, because he's

9:14

been a public persona for decades

9:16

now, there are areas in which

9:18

he's very overt. One is his

9:20

low level of comfort with international

9:22

trade as it stands, right? So

9:24

global trade, he views it as

9:26

a kind of a zero-sum game,

9:28

there are winners and there are

9:30

losers. Ironically, in the way that

9:32

the global trade has developed in

9:34

the last 20 years, there is

9:36

one or two grains of truth

9:38

in this, right? So you have

9:40

this major imbalance that countries, say,

9:42

you know, China, 17% of global

9:44

GDP, but 31% of global manufacturing,

9:46

most of the trade being, of

9:49

course, in manufacturing, and then you

9:51

have countries like US, they're on

9:53

the other side, basically lending their

9:55

demand to the countries that benefit

9:57

from current account surplus that has

9:59

its... So that's on the capital

10:01

account and so on. So trade

10:03

is one when there are real

10:05

beliefs, real values. So decisions are

10:07

more ver traccionate. We use again,

10:09

Viberium model. The second one I

10:11

would say is nativism. So some

10:13

of the uglier things that were

10:15

said during the election about illegal

10:17

immigrants and so on, and there

10:19

also seems to be a deeper

10:21

conviction. Now I'm of the view

10:23

that of course, you know, immigration

10:25

should be managed and not mismanaged.

10:27

So that's no different in a

10:29

classic country of immigration like United

10:31

States. So a lot needs to

10:33

be done with it. But certain

10:35

ways in which this was put

10:37

across is quite, you know, I

10:39

have some misgivings about. that was

10:41

put forward, especially in the context

10:44

of a multi-racial, multi-ethnic country. And

10:46

so what does it mean for,

10:48

you know, in terms of international

10:50

relations? Well, there are those countries

10:52

that are trembling right now because

10:54

of their current account surpluses, Canada

10:56

and Mexico first, and I'm talking

10:58

just about the allies, Germany and

11:00

Japan second. And what is much

11:02

worse is that in the transactional

11:04

space, there is also room to

11:06

reject certain security arrangements. And here

11:08

is the countries that are concerned,

11:10

not because of a trade surplus,

11:12

but because of their security position

11:14

that's been undermined by the last

11:16

couple of years of sort of

11:18

the unraveling of a global system.

11:20

And that's South Korea, this Taiwan,

11:22

this potentially Finland, Romania, and some

11:24

others. And so, you know, what

11:26

could happen here? One is that

11:28

this is purely transactional and therefore

11:30

there will be just some give

11:32

and take and, you know, a

11:34

pass on and at the end

11:36

of a day, there will be

11:38

just a minor regime of global

11:41

space a little bit like in

11:43

between 2016 and 2020. But the

11:45

second one, which is much more

11:47

concerning, is that the new administration

11:49

will enter some kind of a

11:51

grand burger. So kind of a

11:53

concert of powers, right? So exactly

11:55

what some of the idealogues in

11:57

Moscow would love to see. So

11:59

here is a couple of those

12:01

big powers and they will decide

12:03

together what the future of the

12:05

lesser players are. So spheres of

12:07

influence and so on. So if

12:09

you think about from the perspective

12:11

of the value-driven convictions, potential convictions

12:13

that President-alak may have, well, that's

12:15

actually good news for Kim Jong-un

12:17

or Vladimir Putin because there is

12:19

no trade bone. with these countries,

12:21

right? U.S. doesn't have a trade

12:23

bone. It doesn't necessarily have, you

12:25

know, immigration bone with them either.

12:27

It's a bit more complex with

12:29

in the case of China, but

12:31

it's extremely bad news for all

12:33

of those countries that feel threatened

12:36

by, you know, the rising powers,

12:38

and especially, you know, China and

12:40

Russia and their respective geo strategic

12:42

regions. So a lot of instability

12:44

and therefore a lot of the,

12:46

you know, I guess, so-called, of

12:48

course, claims about low contribution for

12:50

defense and so on, it's definitely

12:52

true to some extent for some

12:54

of those economies and some of

12:56

those countries. However, you know, many

12:58

of those have evolved their entire

13:00

security system based on long-term existing

13:02

pre-existing treaties, right? Article 5 in

13:04

case of NATO, bilateral relations in

13:06

Asia Pacific. If that unravels, then

13:08

this multi-paral chaos will be very

13:10

damaging. Let's not forget that puts

13:12

US in a basket of revisionist

13:14

powers. So the two types of

13:16

revisionists, there is the economic revisionism,

13:18

which is, for example, exactly what

13:20

Trump preaches in terms of his

13:22

attitude to trade, how this is

13:24

organized around the world, and then

13:26

there is the geostrategic revisionist, which

13:28

is China's case. And then Russia

13:31

that basically plays on both keyboards

13:33

here. This is the world in

13:35

which, you know, world in transition.

13:37

So we don't know yet what

13:39

kind of new arrangement will evolve

13:41

out of this, but a lot

13:43

of uncertainty in the next four

13:45

years as, you know, if I

13:47

were to worry about something is

13:49

about this very fidgety and temperate

13:51

early morning tweets and can change

13:53

a lot of things, not just

13:55

in the market, you know, we

13:57

obsess about markets and what we

13:59

do, but, you know, there's this

14:01

other reality out there. And if

14:03

you compare the, the, what greed

14:05

can do to you as a

14:07

driver and what insecurity can do

14:09

to your driver. And of course

14:11

the latter is much more subliminal

14:13

and much more limbic and kind

14:15

of makes you act a lot

14:17

faster. So this is a significant

14:19

source of insecurity over and above,

14:21

you know, weird stuff like yesterday

14:23

Korea. I'm sorry, it's just completely

14:25

unexpected things that can happen. Some

14:28

of this is related to the

14:30

sense of insecurity that's rising among

14:32

a lot of countries. countries, especially

14:34

in what Nicholas Pigman called the

14:36

rimland, so those smaller countries around

14:38

the heartland, heartland being, you know,

14:40

the core of Eurasia, that's kind

14:42

of the geopolitical thinking that unfortunately

14:44

has. have to kind of dust

14:46

off, no, usually use dusting of

14:48

19th century readings. Right. And so

14:50

if we zoom into something like

14:52

the Russia-Ukraine conflict, so that has

14:54

been going on for a number

14:56

of years, people have views around,

14:58

you know, who's winning, who's losing,

15:00

but how should we think about

15:02

that conflict now? So at this

15:04

stage, we're talking early December 24,

15:06

the three levels here. One is

15:08

the actual war. The second one

15:10

is hopes for a ceasefire, plans

15:12

for a ceasefire. And the third

15:14

one is a long-term solution, long-term

15:16

settlement. On this last one, you

15:18

really only hear ideas from Russia

15:20

right now. And so let me

15:23

just take them one by one.

15:25

When you call the war, the

15:27

war itself has always three levels,

15:29

so the tactical, operational, and strategic

15:31

level, the tactical level, it's more

15:33

of the same. Nothing much is

15:35

happening. There's a little bit of

15:37

the progress of the Russian army,

15:39

especially in Indonesia and Pokrovsk and

15:41

Bahamut and Kupionsk and so on,

15:43

doesn't really change the picture that

15:45

much. On the operational side, it's

15:47

also been a while since we

15:49

haven't seen asymmetric escalation from the

15:51

Ukrainian side. You know, back in

15:53

the day, they would attack the

15:55

Kerch bridge in Crimea. There were

15:57

some, you know, attacks, and successful

15:59

in the Black Sea. There was,

16:01

of course, this encouraging into Karsk,

16:03

which is still standing, but right

16:05

now it's kind of a tactical

16:07

thing, and their elite troops are

16:09

maintaining this. So nothing much happening

16:11

there. But at the strategic level,

16:13

the escalator or ladder that belongs

16:15

to Russians. Russians are very good

16:18

in intensifying the conflict and the

16:20

strategic level, that that launch of

16:22

the Merv, so the multiple integrated

16:24

targeted reentry vehicle into the neapro

16:26

that you saw the other day,

16:28

so potentially, you know, hypersonic missile

16:30

with multiple warheads. That was a

16:32

signaling, of course, way beyond Ukraine.

16:34

It was a signaling to the

16:36

West. The hybrid war in all

16:38

of this colors, you know, cutting

16:40

the, I mean, alleged because it's

16:42

all deniable, but cutting the optical

16:44

wires under the Baltic Sea and

16:46

attacks on the GPS. and Estonia

16:48

and then disrupting phone connections in

16:50

Denmark as the Chinese vessel was

16:52

detained or was trying to be

16:54

detained with Chinese vessel that's apparently

16:56

responsible for cutting those optic fibers

16:58

and the Baltics and so on

17:00

so forth, right? Disruptions to rail

17:02

transportation in Denmark is a lot

17:04

of hybrid activity. So that initiative

17:06

belongs to Russia right now. And

17:08

so it's almost, it invites us

17:10

to jump straight to the long-term

17:12

solution before we speak about the

17:15

ceasefire. So let's do that. It

17:17

really looks to me like Russians

17:19

have not abandoned their December 21

17:21

set of demands that were addressed

17:23

at NATO at that point, which

17:25

basically meant rolling back the losses

17:27

in terms of a sphere of

17:29

influence in Eastern Europe. So integrating

17:31

Ukraine in some form of lesser

17:33

sovereignty and then kicking out NATO

17:35

troops of Eastern Europe. Of course,

17:37

the two and a half years

17:39

of the war in Ukraine has

17:41

seen exactly the opposites, sort of

17:43

extension of NATO in Finland and

17:45

in Sweden. By the way, one

17:47

of the US think tanks that

17:49

supported Trump's election re-election center for

17:51

renewal in America was very critical

17:53

of that, of the expansion of

17:55

NATO into Finland and Sweden. So

17:57

let's see what happens with that

17:59

going forward. But nothing has changed

18:01

in terms of Russia's claims to

18:03

its sphere of influence, a sphere

18:05

of control. So something that's more

18:07

occasional. So Russia you don't think

18:10

has, is, well at least overtly,

18:12

they're not saying they're comfortable with

18:14

just retaining what they've occupied and

18:16

leaving the rest to Ukraine. Well,

18:18

I mean, there are a lot

18:20

of different ideas. The number one

18:22

is to retain this occupied terrain,

18:24

but number two is to leave

18:26

Ukraine some kind of a rump

18:28

form with very limited sovereignty, you

18:30

know, demilitarization, denazification, change of government,

18:32

essentially sort of vacalization of the

18:34

country. But there are, you know,

18:36

obviously there is a whole domino

18:38

theory with multiple. other countries there

18:40

that would be extremely fragile if

18:42

that were to happen. We're seeing

18:44

what's happening in Georgia, right? So

18:46

there's a lot of spillover. How

18:48

could that be achieved? So it's

18:50

good to read, actually, some of

18:52

the Russian writers, Sergei Karaganov, is

18:54

one who actually strongly suggests use

18:56

of nuclear weapons, tactical nuclear weapons,

18:58

to actually bring Europe to its

19:00

knees. And he sees, of course,

19:02

Trump's election as an opportunity for

19:05

Russia to actually expand. or as

19:07

realists would say, secure its interests,

19:09

security interests. And then you have

19:11

other writers, Russian writers, federal Lukiano,

19:13

for Vasili Khashin, that maybe do

19:15

not go in this direction, but

19:17

very strongly advocate even a stronger

19:19

relationship between Russia and China. going

19:21

forward. So the idea is that

19:23

sometimes permeated through the Biden administration,

19:25

some, you know, pacifying Russia and

19:27

introducing this reverse kissinger dialogue whereby

19:29

Russia could be satisfied with some

19:31

minimal gains and then I would

19:33

should be driven between Russia and

19:35

China. It's unlikely to happen with

19:37

the current leadership and current thinking

19:39

in Moscow and in Beijing as

19:41

well. So these long-term plans, I

19:43

think, again, the initiative was on

19:45

the Russian side. So what about

19:47

the ceasefire, then somewhere in the

19:49

middle? But first, we don't know

19:51

what it actually means on the

19:53

ground. Is this some kind of

19:55

a buffer zone, and who's responsible

19:57

for the buffer zone? Let's not

19:59

forget the buffer zones are usually

20:02

asymmetric, so they are usually buffering

20:04

one side against the other. And

20:06

there's a variety of different ideas

20:08

who should man that, you know,

20:10

say, DMZ, right? Like in Korea

20:12

or in Cyprus and somewhere. And

20:14

of course, there's not much enthusiasm

20:16

about Western troops being sent into

20:18

the area. But there are two

20:20

risks for Ukraine proper with the

20:22

idea of a ceasefire. Number one,

20:24

Russian burn rate is a lot

20:26

higher than Ukraine's. It's a larger

20:28

country with larger resources, but they've

20:30

lost, by recent count, 10, 10,000

20:32

vehicles. two and a half years,

20:34

of which I think 3,600 tanks,

20:36

and they produce only about 1,500

20:38

a year, right? So stopping the

20:40

war allows them to rearm very

20:42

quickly and much faster than Ukraine

20:44

and Ukraine in whatever form of

20:46

cooperation with the Western allies and

20:48

whatever security guarantees that could be

20:50

brought. So this is the first

20:52

problem. The problem is that Chapter

20:54

3 would be so much easier

20:57

to reopen by a much more

20:59

prepared Russia functioning within its constant

21:01

war economy. So not really establishing

21:03

a normal civilian economy system, but

21:05

keeping what it is with the

21:07

increased dependence on civilian product imports

21:09

from China. But the second source

21:11

of risk is for the Ukrainian

21:13

politics, because depending how this ceasefire

21:15

is engineered, what it actually means,

21:17

there could be a lot of

21:19

recrimination within the sort of political

21:21

sphere in Ukraine. The elections are

21:23

long overdue. It could be that

21:25

Zelenski goes down the way Church

21:27

filled it after Second World War.

21:29

And it would be quite simple

21:31

for Russia to drive the wedge

21:33

and sort of play different candidates

21:35

there for Russia's own advantage. There

21:37

will be voices in Ukraine, especially

21:39

if there is a recognition the

21:41

war was lost. So not straight

21:43

surrender, but some form of loss

21:45

of territory, loss of 80,000 at

21:47

least human lives. these recrimination may

21:49

change completely the political climate in

21:52

Ukraine and there is no guarantee

21:54

that this romp Ukraine especially if

21:56

let's say if the forces military

21:58

forces have to be demobilized or

22:00

maybe they'll move abroad in some

22:02

form of you know additional chip

22:04

that the West would have on

22:06

Russia's further expansion that could lead

22:08

to reorientation of Ukraine's politics the

22:10

way we see it in Eastern

22:12

Europe and certain countries. Of course,

22:14

it's happened already in Hungary and

22:16

Slovakia. It may be happening right

22:18

now in Georgia. Romania suddenly unstable.

22:20

gone through seven elections in two

22:22

years, right? So you'll have that

22:24

strong impact. And I think this

22:26

recognition that you cannot really count

22:28

on the West, that could be

22:30

something that that could be a

22:32

narrative that wins over over time.

22:34

Sometimes I'm wondering, you know, one

22:36

country, I don't know very well.

22:38

Bingham once is Hungary. Why is

22:40

Hungary actually playing this role of

22:42

kind of an entry point for

22:44

both Russia and China into the

22:46

European politics and the economic sphere

22:49

as well? And maybe we have

22:51

to go back to 1956 and

22:53

Soviet invasion. And this was a

22:55

taboo topic until end of the

22:57

1980s, but then suddenly Hungarians could

22:59

start speaking about it. And what

23:01

happened then? is that Voice of

23:03

America was acting people on fighting,

23:05

right? Just go and defend your

23:07

democracy and your freedom against the

23:09

Soviet invasion, so on. But the

23:11

West was distracted, was distracted by

23:13

the Suez Canal crisis and other

23:15

things, and there was nobody there

23:17

that was ready to help Hungarians.

23:19

And so probably that recognition, you

23:21

know, that's not going to be

23:23

different in Armenia and Georgia and

23:25

many countries, nobody's going to come

23:27

and help us. So maybe we

23:29

should just settle. with the big

23:31

power next door, which has this

23:33

track record. And there is no

23:35

guarantee, I think, depending of course,

23:37

in how the West and US

23:39

and NATO will play that. There

23:41

is no guarantee that a ceasefire

23:44

in Ukraine will kind of solidify

23:46

Ukraine as a Western player, a

23:48

pro-vesting player in future. Okay. And

23:50

what does this mean for the

23:52

European Union then? Because obviously the

23:54

US, at least Trump, is trying

23:56

to force more of the risk

23:58

over to Western Europe, you know,

24:00

Germany, you know, we've got elections

24:02

of coming up, partly due to

24:04

how to fund support for Ukraine,

24:06

France politically unstable at the moment

24:08

as well. I mean, what's Europe's

24:10

position in this? There is a

24:12

continuum of outcomes about which we'll

24:14

know very little until the election

24:16

in Germany or just pointing it

24:18

out. So that's that will be

24:20

one of the determinant drivers within

24:22

this continuum. No number of options,

24:24

but there are two extremes. One

24:26

extreme is Draghi's report, right? When

24:28

it was two months ago, September,

24:30

right? other August report, which shows

24:32

exactly the way forward. So first,

24:34

building a common capital market in

24:36

Europe so that Europe can really

24:39

re-industrialize, re-arm re-industrialize. We see the

24:41

reluctance, especially in Germany and the

24:43

Netherlands, and Sweden, to neutralize their

24:45

creditworthiness when shared with other countries.

24:47

I think Freddie Schmerz said yesterday

24:49

in Bundestag that he doesn't want.

24:51

the spreads on German bond to,

24:53

and the decision whether to cut

24:55

budget or not be depending on

24:57

the market as it is the

24:59

case right now in France, right?

25:01

So there is definitely a resistance

25:03

to it, but without a very

25:05

bold movement ahead, which we had

25:07

only one precedent that was during

25:09

COVID, This is unlikely to happen

25:11

and therefore the resources will not

25:13

be pulled and will be very

25:15

very limited So that's one extreme.

25:17

There will be very positive if

25:19

Europe went in this direction Depends

25:21

really on the political decisions in

25:23

Germany and France and so on

25:25

the negative side. So let's the

25:27

ultimate nightmare scenario. You know, it's

25:29

120 years now since the Berlin

25:31

Conference, remember this, 1884, 1885, which

25:34

is marked with the scramble for

25:36

Africa label. So the Europe was

25:38

dividing the world, right? In fact,

25:40

this was actually a bit of

25:42

crowning and flag waving of the

25:44

scramble. It's like Woodstock for Flower

25:46

Power. It was like the end.

25:48

But it matters as a sort

25:50

of symbolic sphere. Right now is

25:52

the world dividing Europe, right? the

25:54

other around. So Russia and China

25:56

trying to do it. Of course,

25:58

Trump administration, let's not forget Trump

26:00

was a big fanatic of Brexit.

26:02

So disruption of the integration in

26:04

Europe seems to be in his

26:06

interest. So bits and pieces could

26:08

be peeled away, just like Serbia

26:10

and Hungary represent those entry points

26:12

to China and to Russia. There

26:14

could be some that the new

26:16

America could also leverage against the

26:18

European unions. remaining powers, for example,

26:20

is a trade block, right? And

26:22

so what does it mean? It

26:24

means different things depending where you

26:26

are. in Europe. Europe is not

26:28

a continent, it's a peninsula. It's

26:31

a peninsula of Eurasia. And so

26:33

you have different security interests and

26:35

different prosperity interests. And again, we

26:37

are in fear and agreed. And

26:39

what matters more? Well, depends where

26:41

you are. And of course, if

26:43

you are in the eastern part

26:45

of the European continent's security matters,

26:47

because of the immigration pressure. And

26:49

if you're in the western, northwestern

26:51

part, prosperity probably matters more, although

26:53

with the entry of Sweden and

26:55

Finland, that also changes in terms

26:57

of the northern approach. So very

26:59

dependent how America will play this,

27:01

you know, the Biden interlude was

27:03

helpful, I don't think enough, has

27:05

been done to actually coordinate the

27:07

policies, the transatlantic. Trade treaty was

27:09

not really moved forward. It seems

27:11

like the far progressive left in

27:13

the US has the same isolation

27:15

as drivers in terms of trade

27:17

policy as the far right, the

27:19

populist far right, which probably together

27:21

makes a majority of the of

27:23

the population here bad news for

27:26

connectivity, economic connectivity between Europe and

27:28

the US and the US and

27:30

Asia as well. So it's hard

27:32

to be optimistic, but we probably,

27:34

to answer your question, we have

27:36

to wait for German elections and

27:38

the new government in France, probably.

27:40

Yeah, as you've mentioned China a

27:42

few times. So first of all,

27:44

China in relation to the Russia-Ukraine

27:46

war, how they involved, you know,

27:48

because the, you know, the outsider

27:50

would say China is basically providing

27:52

armaments to Russia and allowing Russia

27:54

to circumvent sanctions, you know, providing

27:56

goods into Russia. And so there's

27:58

this kind of perspective that China's

28:00

sort of backing Russia. Is that

28:02

a fair characterization or is there

28:04

something more going on? So it's

28:06

a fair characterization, I think what's

28:08

unfair is to say that Russia

28:10

is somehow being vacillized by China,

28:12

because this is, people do not

28:14

know Russia very well, tend to

28:16

underestimate its power because of GDP,

28:18

you know, Russia has cards to

28:21

play with China, first as a

28:23

nuclear power, and especially. the context

28:25

of rising stakes between US and

28:27

China. Russia has the geography, Russia

28:29

has the commodities, Russia has a

28:31

lot of different levers. And I

28:33

think Moscow has also played its

28:35

hand very well with some of

28:37

the players that were viewed as

28:39

completely dependent on China. I mean,

28:41

North Korea is the best example,

28:43

right? move by North Korea and

28:45

Russia to establish much stronger security

28:47

partnership in a way abolished or

28:49

discontinued a period of about 10

28:51

years where the entire escalation initiative

28:53

in the Western Pacific belonged to

28:55

Beijing. It's no longer the case,

28:57

right? Because that far north wing

28:59

of the theater is now a

29:01

little more unpredictable for Beijing because

29:03

North Korea has sort of clenched

29:05

an additional source of support and

29:07

can play between the two powers.

29:09

So the two countries do not

29:11

agree eye to eye on everything.

29:13

And of course, you pointed out,

29:15

you know, sub components. and a

29:18

lot of technology that's been flowing

29:20

into Russia. And of course, it's

29:22

enough to look at the trade

29:24

account between the two countries, how

29:26

it was transformed completely in the

29:28

last two and a half years.

29:30

So without China, of course, that

29:32

effort wouldn't be possible, would not

29:34

have been possible for Russia. And

29:36

also in terms of informational war.

29:38

There are parts of the world

29:40

where the Chinese activity, both diplomatic

29:42

and covert and so on, is

29:44

much stronger than Russia's. They definitely,

29:46

you know, when I hear certain

29:48

snippets, they sound like they're taken

29:50

from Russian propaganda, but they're actually

29:52

promoted by the Chinese, say, anti-colonial

29:54

attitudes. This is actually interesting because

29:56

that existed in 1950s and 1960s

29:58

until the Sino-Soviet split. But in

30:00

terms of what we call now

30:02

global South and what we used

30:04

to call emerging markets and before

30:06

their third world, so during the

30:08

third world era, the actual split

30:10

between the. and Russian anti-colonial narrative

30:13

happened in 1973 during a conference

30:15

in Algiers were to and lie,

30:17

attacked Soviet Union for being one

30:19

of those colonial powers. And believe

30:21

it or not, and we, you

30:23

know, proudly here fighting colonial. So

30:25

Soviet Union is this industrial country

30:27

and we the developing countries. So

30:29

interesting enough, right now, there is

30:31

no split between the two. So

30:33

they both trying to play on

30:35

those anti-colonial. reminiscences in different parts

30:37

of world, Africa, Southeast Asia, to

30:39

lesser extent Latin America as well.

30:41

And so anti-Americanism is, of course,

30:43

what just forms an important part

30:45

of that narrative, solidifying the universe

30:47

of meaning, which, you know, many

30:49

of us is quite alien, not

30:51

least because Russia is conducting a

30:53

neo-colonial war itself, right? But it's

30:55

a very strong partnership at the

30:57

moment. China is benefiting from the

30:59

war this way or another. So

31:01

whatever the outcome, it has been

31:03

a sort of a positive thing.

31:05

I don't think there is a

31:08

much downside from the Belt and

31:10

Road Initiative rail-based trade going through

31:12

Belarus and Ukraine. Not much of

31:14

a loss there. So overall, I

31:16

believe that no matter what the

31:18

outcome will be, it will be

31:20

positive for China. There's a lot

31:22

of people in Russia trying to

31:24

think how to structure this relationship

31:26

once the war is won in

31:28

some form by Moscow in order

31:30

not to allow the Russian economy

31:32

to be completely subjugated to the

31:34

interest of China. And so it's

31:36

funny, I actually just got back

31:38

from Brazil. So little little parentheses

31:40

there. for many operations, industrial operations

31:42

in Brazil, indeed industrial chemicals. And

31:44

they used to be a very

31:46

strong industrial chemical industry there, a

31:48

sector that empowered a lot of

31:50

industrial development, especially in the south

31:52

of the country. That has been

31:54

in crisis in the last two

31:56

years. Why? Because of the Ukrainian

31:58

war. Like, how is that connected?

32:00

Right. much of what you generate

32:02

in chemical industry comes from natural

32:05

gas. And Russia sells natural gas

32:07

very cheaply to China. So China

32:09

is now very competitive selling those

32:11

chemicals and sort of undercutting the

32:13

domestic production in Brazil. So this

32:15

is how far reaching their relations

32:17

and the dislocations can be. And

32:19

once the industrialize and you start

32:21

losing human capital, it's very difficult

32:23

to re-industrialize, you don't have to

32:25

look further than Nebraska and Oklahoma.

32:27

Okay, yeah. And then more broadly

32:29

on China, you know, it seems

32:31

like it's a bipartisan in the

32:33

US that they want to tame

32:35

China in different ways. You know,

32:37

the Democrats have one way of

32:39

doing it, the Republicans may have

32:41

another way, but both basically don't

32:43

want China to emerge as a

32:45

superpower. So how do you think

32:47

about that relationship? I guess now

32:49

that we have Trump as well,

32:51

I mean, how will that relationship

32:53

evolve? Yeah, so that depends how

32:55

you define superpower. So one is

32:57

the revision is related to trade,

32:59

right? And I don't think there

33:01

is much understanding in the incoming

33:03

administration what it actually means. And

33:05

why am I saying this? Last

33:08

weekend there was this tweet in

33:10

which the president of the like

33:12

said that if the BRICS countries

33:14

stop using the dollar will sanction

33:16

you. Well, it's either or. require

33:18

the current account relationships in which

33:20

other countries right now accumulate a

33:22

lot of dollars so they can

33:24

use them in capital account or

33:26

you generate current account surplus in

33:28

which case the dollar will naturally

33:30

lose its importance especially on the

33:32

trade account but by definition also

33:34

long term in the capital account

33:36

so either one or the other

33:38

I don't think there is a

33:40

there's a common view on how

33:42

to achieve that even though as

33:44

I said before the rebalancing of

33:46

some of those imbalances is a

33:48

good thing. Not only because it

33:50

hasn't happened just by inertia, right?

33:52

So a lot of these imbalances

33:54

are actually planned. I mean, a

33:56

good example in China is shawang

33:58

shan shan shan shawang, so dual

34:00

circulation, which China makes other economies

34:02

completely dependent on their products. becomes

34:04

its own economies internally independent of

34:06

inflow. So in a way, that's

34:08

not how global trade should be

34:10

organized. The global trade should be

34:12

organized is that you export something

34:14

in order to import something else,

34:16

right? And China is almost the

34:19

opposite. You import the absolute minimum,

34:21

so commodities and some high-tech, in

34:23

order to export just about everything,

34:25

a different level of technological advancement.

34:27

So that is definitely generating a

34:29

lot of consensus. But China is

34:31

not only a trade problem, it's

34:33

a security problem. And it's a

34:35

security problem in the Pacific. And

34:37

of course, brings us to a

34:39

much bigger issue. Since Pearl Harbor,

34:41

the United States saw its security

34:43

as securing United States shores, and

34:45

securing the opposite shore of the

34:47

ocean. If you know what I

34:49

mean. So NATO, over Atlantic, and

34:51

then treaties with ROC, South Korea,

34:53

and Japan after the war. And

34:55

that has not changed. That is

34:57

still important in the Pacific, or

34:59

Western Pacific theater. It means essentially

35:01

the securing of the first island

35:03

chain. That's number one problem, because

35:05

it's a creed of the Communist

35:07

Party of China that Taiwan is

35:09

this unfinished. element of the Chinese

35:11

civil war, which is total misnomer

35:13

because there's never there never was

35:15

a civil war in Taiwan, right?

35:17

The civil war started in 1927.

35:19

Taiwan was part of Japan, now

35:21

of China. So, but let's leave

35:23

it aside and ask ourselves, how

35:25

important is this for the US?

35:27

And so it's important from, I

35:30

say, three angles to confront China

35:32

over its ambitions in West Pacific.

35:34

Number one, as I mentioned, is

35:36

security. It has its military dimension.

35:38

So the fact that the Chinese

35:40

assets cannot easily enter deep ocean

35:42

and deep ocean means that you

35:44

can hear everything. And unlike in

35:46

the case of Ukraine, when you

35:48

have some Republicans claiming, well, it's

35:50

Europe's interest, and it's not quite

35:52

on the edge of the water,

35:54

right? So you have Poland and

35:56

Germany and Netherlands and France and

35:58

so on before. becomes a problem

36:00

for the United States. Well, between

36:02

Taiwan and the US is just

36:04

fish. So it's much closer

36:06

in a way. And the way

36:08

that's especially submarines operate these days,

36:10

that deep water and hydrophones allow

36:13

you to know exactly what's happening

36:15

through that entire body of water,

36:17

as opposed to the waters between

36:19

the first island chain and the

36:21

Asian mainland, which are very noisy,

36:23

very, very shallow. And so far,

36:25

the Chinese has been cantoned to

36:27

that. So the first island shade

36:29

sits on that sort of massive

36:32

drop. And so that's technologically important,

36:34

militarily important. The second thing is

36:36

that the world has changed in

36:38

the last two years, and that's

36:40

because of our favorite acronym, AI.

36:42

Until 22, China was the number

36:44

one exporter of AI goods around

36:46

the world. It's been now long

36:48

dethrelmed by Taiwan. So in the

36:51

last two years, the nature of

36:53

the value chain with the advancement

36:55

in that that you see in

36:57

those $3.6 trillion worth of media

36:59

market value, it's all based on

37:01

about 60, an ecosystem about 60

37:03

Taiwanese companies. It's completely new. It's

37:05

not related to TSMC. It's not

37:07

related to just the entire infrastructure,

37:10

the entire ecosystem is. entirely concentrated

37:12

in Taiwan, loss of market by

37:14

China and Korea. And so the

37:16

different assessments, what loss of this

37:18

would mean for global technology, but

37:20

it's not good. And of course

37:22

that connectivity is very strong with

37:24

Orange County and California. And the

37:26

third area is if we do

37:29

care about the allies, and it's

37:31

a question market, and of course

37:33

Japan and Korea are instantly threatened

37:35

in terms of their access to

37:37

energy and goods and trade, global

37:39

trade, if the first island chain

37:41

is lost. So to some extent,

37:43

of course, affects the Philippines as

37:45

well. So yes, there is a

37:48

consensus. What does it mean in

37:50

practical terms? Well, that depends, of

37:52

course, you know, what the activity

37:54

by China is. If, you know,

37:56

there are different levels here, the

37:58

hybrid activity and this sort of

38:00

aggression that's been ongoing, it's, it's,

38:02

it's an act of life. a

38:04

lot of cyber attacks and activity

38:07

through social media and trying to

38:09

corrupt a political class in Taiwan

38:11

proper, not with much success, but

38:13

some. And so that's ongoing. There's

38:15

nothing new about it. And then

38:17

you have three different sort of

38:19

steps, starting from a quarantine. which

38:21

is law enforcement, right? So basically

38:23

determining that waters around Taiwan belong

38:26

to people's republic. This is something

38:28

that China did in East China

38:30

scene 2013 with ADIZ, which they

38:32

declared all over waters that belong

38:34

to Korea and Japan. And so

38:36

the world said, no, we don't

38:38

agree with this, but the reality

38:40

is that a civilian aircraft, when

38:42

they pass through those areas, they

38:44

actually report today to the Chinese

38:47

guards, you know, we're flying through

38:49

our ADIZ. So the fact that

38:51

China has succeeded in expanding their

38:53

footprint there. or fish print. And

38:55

so that will be kind of

38:57

a law enforcement, and it's very

38:59

difficult to know how to react

39:01

to this, mostly a coast guard.

39:03

And then the next step is

39:06

a blockade. And blockade is potentially

39:08

Connecticut. It's really, it's the Navy.

39:10

And it's a question, you know,

39:12

what do you do with this?

39:14

And then you have also invasions.

39:16

So different types of aggression. Aggression

39:18

doesn't mean war. You know, the.

39:20

Hitler's aggression over Czechoslovakia and 3839

39:22

did not translate into war. Hitler's

39:25

aggression against Poland did. So that's

39:27

the difference. So how Taiwan first

39:29

responds to this by extension Japan

39:31

and the United States, that would

39:33

determine if there is a war

39:35

or not. There's one area where

39:37

I would caution very much bricks.

39:39

countries because they seem to be

39:41

obsessed about undermining the dollar, the

39:44

role of the dollar globally. And

39:46

I don't think they're going to

39:48

be very successful if it's up

39:50

to the Chinese to externalize their

39:52

UN because they don't want to

39:54

lose control over the cost of

39:56

capital in their country. So that's

39:58

not going to happen. And I

40:00

don't think India would like to

40:03

use it. A basket's not going

40:05

to work. It hardly works in

40:07

the case of Europe and how

40:09

integrated those economies are. much less

40:11

between Brazil and India. So the

40:13

third option is digital currency. And

40:15

here, you know, it's an unknown,

40:17

but I would caution them against

40:19

it. If you think about the

40:22

last 30 years, especially during the

40:24

30 years of globalization, what the

40:26

US usually did when it confronted

40:28

a crisis, somewhere local crisis, so

40:30

with some exceptions like the Iraq

40:32

war. the Afghan war. Most of

40:34

the time it was for sanctions.

40:36

And that was because of the

40:38

role of the dollar and the

40:41

fact that the dollar transaction simulator

40:43

have to transit through the US

40:45

Bank. And so everything, Gaddafi, Saddam,

40:47

North Korea, Venezuela, Assad, Russia, finally.

40:49

So there's certain deflation in that

40:51

every time you use it. You

40:53

kind of lose some of that

40:55

ammo. But it's still an ammo.

40:57

And so depriving US of that

41:00

ammo increases the risk of kinetic

41:02

conflict. So my view is that

41:04

it's a dangerous game to play.

41:06

It's almost in the interest of

41:08

BRICS countries to leave it as

41:10

it is. And when you listen

41:12

to Luli and others realize they're

41:14

just as economically illiterate as some

41:16

of the people in the Trump's

41:19

team. So that probably is not

41:21

going to go on. Yeah, no,

41:23

that makes sense. Absolutely. you know,

41:25

conflict within the region, you know,

41:27

it started off Israel versus the

41:29

Palestinians and now suddenly it's Lebanon,

41:31

Syria, there's talk of regime change

41:33

in Iran, it's really gone from

41:35

zero to 100 across the region.

41:38

What are your thoughts? Yeah, good

41:40

question. I think what we're observing

41:42

this year is a real total

41:44

Gestalt switch in the region and

41:46

I would call it with just

41:48

one word. It's a post-Sulaymani world.

41:50

So you might remember Kasem Soleimani

41:52

was assassinated by the US in

41:54

Baghdad, by the way, in early

41:57

2020. He was the head of

41:59

the revolutionary guards. Why am I

42:01

bringing him up? And why we're

42:03

talking about 24 and not 2020,

42:05

his physical demise? Kasem Soleimani was

42:07

the architect of what the Iranians

42:09

called Janne-Gator-Kurlaseek. non-classic war or irregular

42:11

warfare, maybe, like this. And he

42:13

knew the history of the Persian

42:15

Empire very well. And he looked

42:18

at it and he saw how

42:20

weak the military, Iranian military, has

42:22

been, artish. the general armed forces

42:24

of Iran when you fly F5

42:26

still from 1970s. And instead of

42:28

doing this, he decided to use

42:30

the avant-garde, the different sentinels of

42:32

groups that for historical or religious

42:34

regions. reasons feel some allegiance to

42:37

Iran's leadership. This is very difficult

42:39

to exact in the Sunni world,

42:41

but it's a lot easier with

42:43

the Ziyads in Yemen or Israelis

42:45

in Lebanon or Alawites in Syria

42:47

or Alawites in Syria and so

42:49

on the Shiites in general. And

42:51

so these tentacles went everywhere where

42:53

Sasanian Empire did. That's why Yemen,

42:56

right? You'll think why so far?

42:58

But if you look at the

43:00

Sasanian that from the third century,

43:02

Yemen was part of Sasanian Empire.

43:04

not contiguous, but it was. And

43:06

of course Lebanon, Syria and Iraq

43:08

and the whole ark there. And

43:10

so this has been now all

43:12

but dismantled by Israel, especially, you

43:15

know, Israel was unprepared for Hamas's

43:17

attack, but was very prepared to

43:19

fight Hezbollah since the 2005 debacle

43:21

in southern Lebanon. And so that

43:23

has changed completely the power play,

43:25

the balance of power. Hence Assad's

43:27

weakness, you know, which is being

43:29

now exploited. Hayat Tahrir Asham in

43:31

North Western Syria, or if there

43:34

are Turkish backers. So we're seeing

43:36

a sort of an emergence of

43:38

a new world. I think Iran

43:40

will probably send troops, or he's

43:42

already sending troops to Tumbaka Sad,

43:44

because there's too much of a

43:46

loss. But the undermining of the

43:48

Pzule money system, where the country

43:50

or the regime at least, could

43:53

feel relatively safe by not being

43:55

forced to fight in the homeland.

43:57

sort of projecting power elsewhere through

43:59

its post-imperial, long post-imperial, but since

44:01

those sentinels out there, that has

44:03

been significantly weakened. Now having said

44:05

that, you know, a year, over

44:07

a year, 14 months of fighting

44:09

by IDF leaves maybe with an

44:12

impression that Israel is devoid of

44:14

vision, devoid of long-term political strategic

44:16

vision. It's a small country, a

44:18

very little strategic depth. which is

44:20

fighting essentially a military operation with

44:22

very little thought, unless it's something

44:24

really scary, a little thought how

44:26

to organize the world in the

44:28

Middle East, the day after, whatever

44:31

it means the day after. And

44:33

so a small country has very

44:35

few options. Of course, it's easy

44:37

to say, well, you have this

44:39

big brother on the other. and

44:41

of the Atlantic that helps, but

44:43

you still need cooperation with one

44:45

of the three key regimes here.

44:47

I'm not really counting Egypt, but

44:50

I count Turkey, Saudi Arabia, and

44:52

Iran in some form. But let's

44:54

not forget the pre-revolutionary Iran was

44:56

a strong ally of Israel. I

44:58

don't think there is much. thinking

45:00

behind this, you know, how this

45:02

world should look. I think there's

45:04

a lot of short-termism there. I

45:06

think the elites is trying to

45:09

just push over the reconning over

45:11

what happened on October 7, you

45:13

know, who's responsible for it in

45:15

Israel, for the entire Hamas phenomenon,

45:17

right? Well, I was that supported

45:19

for so long by Israel, and

45:21

since the very beginning, since the

45:23

very beginning, since the very beginning,

45:25

since before Sheikh Yesing created this

45:28

in 1987, right. So it's a

45:30

very difficult picture right now. And

45:32

of course, the Syria, quagmire makes

45:34

it even more blurry. You have

45:36

three parties there. You have Kurds

45:38

in the US. You have the

45:40

Turkish side with HDS. And of

45:42

course, you have the Alawites without

45:44

much of a Hezbollah support. And

45:46

I always remind everybody that Hezbollah

45:49

used to fight Hamas during the

45:51

first Syrian war. And again, it's

45:53

usually forgot. US cooperated with Hezbollah

45:55

in order to fight ISIS. And

45:57

ISIS was one group that never

45:59

targeted Israel. So that's something that

46:01

we should keep in mind if

46:03

the Syrian war intensifies. Now you

46:05

mentioned Israel hasn't got a plan

46:08

with the large regional powers, but

46:10

we have the Abraham Accords, you

46:12

know, which was effectively an alliance

46:14

with Saudi and also UAE. Doesn't

46:16

that sort of signal they do

46:18

have something with Saudi or have

46:20

the events of the party have

46:22

changed all of that? Yeah, I

46:24

think, you know, you always have

46:27

the elite and the street. And

46:29

so right now, after this year,

46:31

I'm not really referring even to

46:33

what happened in Lebanon, but especially

46:35

to the way in which Israelis

46:37

conducted their war on the ground

46:39

in Gaza, that will be very

46:41

difficult for the regime in Saudi

46:43

Arabia to engineer something officially right

46:46

now of Israel, with the current

46:48

governments. something quite dramatic would have

46:50

to happen, maybe the death of

46:52

the patriarch, you know, the king,

46:54

who knows. I don't see this

46:56

happening in the air term unless

46:58

the new crew in Washington has

47:00

a plan for that, but I

47:02

saw the Jared Kushner is actually

47:05

going to be ambassador to Paris.

47:07

So it's a... It's a different

47:09

type of cynical. I'm not holding

47:11

my breath on that. In the

47:13

longer term, it would make sense

47:15

for Israel to find common ground

47:17

with Saudi Arabia, of course, the

47:19

economic relations are there, but not

47:21

at the diplomatic level, not an

47:24

official level. And I think it

47:26

depends a lot on what happens

47:28

in Iran and how Iran will

47:30

play the Syrian war to what

47:32

extent that. might or might not

47:34

also drag the Saudis. The Pandora's

47:36

box has been opened. It's been

47:38

kept open by Israel. Israel really

47:40

tried to drag United States into

47:43

a conflict with Iran. Kudos for,

47:45

you know, to Biden administration for

47:47

not allowing themselves to be dragged

47:49

into this. So I think the

47:51

next chapter will be in Iran

47:53

war. I mean, do you think

47:55

there could be an Iran war,

47:57

you know, between Israel and Iran,

47:59

and then the US does end

48:02

up guessing it? I'd never underestimate

48:04

how busy the Swiss embassy in

48:06

Tehran can be passing on messages

48:08

from Washington. It does look to

48:10

me that the restraint has been

48:12

on the Iranian side, and so

48:14

definitely voices in, you know, within

48:16

Israel that somehow an upheaval, the

48:18

military upheaval, giving the weakness of

48:21

our task of the armed forces

48:23

in Iran, would somehow help topple

48:25

the regime. I have no

48:27

signs of that number one. Number

48:29

two, the two things with an

48:31

Iranian society. One is, you know,

48:34

very strong displeasure with the economic

48:36

situation, with the regime as such,

48:38

and just the internal situation is

48:40

the way it is. But there

48:42

is a certain level, maybe not

48:44

Russian level, but But kind of

48:46

a post-imperial pride in terms of

48:49

Iran's influence around the region, especially

48:51

since that Iraq, he wore the

48:53

bagel by the United States and

48:55

the space that it opened for

48:57

Iran in the region. So people

48:59

engage usually in the conversation saying

49:02

that, you know, these are our

49:04

brethren, we should support them, and

49:06

we should protect them against the

49:08

bad Sunnis. or what have you.

49:10

So I would not go as

49:12

far as to claim that, you

49:14

know, here's a revolution coming because

49:17

Israeli bombs are falling in Iran

49:19

and therefore everything is solved overnight.

49:21

I think it's more complex than

49:23

that. But there will be an

49:25

opportunity for some refreshments, especially after

49:27

Kamanai's passing, right? And that's probably

49:30

in the next couple of months.

49:32

Yeah. And, you know, we've talked

49:34

lots of hot sort of geopolitical

49:36

spots. You know, what worries you

49:38

the most out of everything that

49:40

we've talked about? Was there something

49:42

else that's worrying you? No, I

49:45

think what worries me is those

49:47

intemperate fidgety tweets every morning that

49:49

could very quickly destabilize entire regions

49:51

of the world. Think about the

49:53

messaging from Trump regarding Taiwan. It's

49:55

very undisciplined. You know, it's it's

49:58

it's factually incorrect. You know, Taiwan

50:00

has stolen our technology. produced a

50:02

two nanometer semiconductors, right? And might

50:04

never, if there is a country

50:06

that might catch up as Japan.

50:08

So that kind of messaging, which

50:10

is really quite at variance with

50:13

what typically the United States does,

50:15

which is strategic ambiguity or strategic

50:17

clarity as Biden I think on

50:19

four occasions spelled out, that worries

50:21

me quite a bit. What it

50:23

means and what other countries would

50:26

do. Because if this accumulates, if

50:28

this becomes a pattern, then

50:30

goodbye and PT. Then you see South

50:32

Korea first. Japan probably might take a

50:34

little longer because the public opinion is

50:37

not quite there, but Turkey, Saudi Arabia,

50:39

Poland, other countries might all try and

50:41

get nuclear weapons, not being able to

50:43

depend on the United States anymore. And

50:45

that's a very different world in which

50:47

we would wake up. So yeah, that

50:50

worries me. And you know our audience

50:52

many of them are investors I mean

50:54

how are you positioning yourself in this

50:56

world because it sounds like it's highly

50:58

uncertain so do you just go and

51:00

buy dolls or something or no I

51:02

think it makes sense to you know

51:05

if if we believe that the world

51:07

is really really changing and it's something

51:09

quite drastic could happen very quickly and

51:11

then it's to extract call optionality on

51:13

such a high impact low frequency event

51:15

because as low frequency, therefore low probability,

51:18

if your body of probability is frequentist,

51:20

then you cannot really quantify it. but

51:22

it's good to add it on top

51:24

and be my guess. Does it mean

51:26

shorting apple? Maybe. Does it mean shorting

51:28

for this for this Q in Australia

51:31

or does it mean, you know, buying

51:33

something that would benefit hugely from it

51:35

or or save haven or whatever? It's

51:37

good to have that over, you know,

51:39

layers somewhere over other elements in in

51:41

the portfolio. I would strongly suggest that's

51:43

that's the world where we're going to

51:46

have volatility coming from different corners. So

51:48

we're not used to. Okay yeah that

51:50

makes sense now I did want to

51:52

round up with a couple of personal

51:54

questions in one is what's the best

51:56

investment advice you've ever received from anyone

51:59

rather than investments actually trading is to

52:01

automate your sales. And here's why. We're

52:03

probably more emotional when it relates to

52:05

positions when we're to liquidate and, you

52:07

know, our brains function a certain way.

52:09

So, you know, when emotion, an emotion

52:12

is generated in the make dollar, right,

52:14

and the salt, reptilian brain, but that's

52:16

in itself, with the fear or anger

52:18

or something. But then afterwards, hippotalamus at

52:20

the very back there decides whether you

52:22

fight, fly away or freeze, these are

52:24

the three and these three are not

52:27

Just genetic, you decide how you behave

52:29

during a childhood and then you transpose

52:31

it. For example, you hold a position

52:33

and you can do only three things.

52:35

You can attack, right? So you can

52:37

say buy more of that or build

52:40

some kind of option strategy around your

52:42

position. You can freeze and do nothing.

52:44

Just wait until it goes away. Or

52:46

you can sell and run away. So

52:48

always those three. And therefore, you will

52:50

have a tendency to go in one

52:53

of the directions for reasons that nothing

52:55

to do with rationality of the of

52:57

your portfolio structure. And because that people

52:59

tell them that afterwards, you know, connects

53:01

with your hormonal system and, you know,

53:03

you start trembling and goose flesh and,

53:06

you know, how it is on a

53:08

trade floor, people start throwing things at

53:10

each other and there's a lot of

53:12

excitement or bad excitement. And so, and

53:14

if you make losses, then this sort

53:16

of legacy emotions become, you know, you

53:18

know, much more, you know, you know,

53:21

you know, cortical. And so it's a

53:23

very important thing is just to set,

53:25

your limits and not look back not

53:27

to adjust it and just just make

53:29

sure you're actually are not emotionally triggered

53:31

to exit positions when things when things

53:34

change. So that's a trading one on

53:36

an investment proper investment one out it's

53:38

a bit too technical but I tend

53:40

to adjust risk not in the discount

53:42

rate but in the cash flow so

53:44

in the numerator rather than in the

53:47

denominator and that comes from personal experience

53:49

of how industrial operations function and that's

53:51

because I spend quite a lot of

53:53

time in the industry other than in

53:55

front of the Bloomberg screen, but that's

53:57

a long long long back. I love

53:59

your point about flights and freezing. to

54:02

trading positions. I'm going to think about

54:04

that and use that myself. I think

54:06

about my childhood. Sounds good. That's great.

54:08

Now the other question I had for

54:10

you was we do have some young

54:12

people in the audience as well. And

54:15

so what advice would you give to

54:17

younger people as they think about their

54:19

careers or their life after they leave

54:21

university? So there are two types of

54:23

people. There are hedgehogs and foxes, right?

54:25

Like in old Azaiaburlans essay, foxes tend

54:28

to know a lot of things, hedgehogs,

54:30

hedgehogs, no one by one thing. If

54:32

you're a hedgehog, you don't even need

54:34

to ask me this question. So if

54:36

you're a fox, here's an answer. I

54:38

would strongly advise against jumping into consulting,

54:41

a generalist job, consulting slash cell site,

54:43

slash big bank. in the hope of

54:45

then moving to a by side of

54:47

private equity or hedge fund or something

54:49

straight. I would strongly advise to try

54:51

and learn something at least about one

54:53

sector of the economy and see how

54:56

value is generated, see the real world,

54:58

see industry rather than just straight in

55:00

front of your screen and then everything

55:02

is a derivative of real value and

55:04

then derivative of a derivative and the

55:06

third and the fourth and so on.

55:09

Because you'll realize how much depends on

55:11

people and the connectivity between people and

55:13

structure. You know, we think about, say,

55:15

capital goods. It's easy to say, well,

55:17

this is just capital. No, a lot

55:19

of labor goes into capital goods, right?

55:22

It's a composite. So people, how they're

55:24

managed, you know, where is the excellence

55:26

or the mistakes? how to dissociate costs

55:28

from risks and so on. You really

55:30

have to learn it on the ground.

55:32

So I strongly recommend if you have

55:34

a chance to go into anything. It

55:37

doesn't have to be, you know, sexy,

55:39

you know, Taiwanese semiconductors, right? And everybody

55:41

on an video or something like this

55:43

could be anything. But it's really good

55:45

to spend some time. You know, it's

55:47

easier for engineers, of course. But, you

55:50

know, different walks of life these days

55:52

with the demographic changing. It's going to

55:54

be the demographic changing. So I strongly

55:56

recommend not to jump straight into generalist

55:58

jobs, but do something very concrete. you

56:00

don't use it every day afterwards, there's

56:03

going to be a lot of lessons

56:05

that you will benefit from the rest

56:07

of your life. That's fantastic advice. And

56:09

then I see you have lots of

56:11

books behind you, so I have to

56:13

ask you. What are some of the

56:15

books that have influenced you? Let me

56:18

start with that. So there is a

56:20

book on history that I strongly recommend.

56:22

It's Europe by Norman Davis. Do you

56:24

know this? It's a very fake normal

56:26

Davis. Yeah, yeah, yeah. The reason, the

56:28

reason being is that he actually doesn't

56:31

feed you with patterns over say a

56:33

thousand, two thousand years history of Europe.

56:35

Rather, he allows you to connect the

56:37

dots yourself. And while he writes about

56:39

it, very different from other traditional writers

56:41

about history, he doesn't just focus on

56:44

the big empires. A lot of small

56:46

moving pieces are also picked up. And

56:48

so that puzzle, you have to rearrange

56:50

in your mind both synchronically and diachronically,

56:52

that was definitely one of the most

56:54

interesting books about things that happened in

56:57

the past that I read. economics the

56:59

fairly recent price of time you know

57:01

this right so that's about interest rates

57:03

and about the lunacy of very low

57:05

interest rates and what it what it

57:07

means what the distortion is and I

57:09

you know I myself before reading this

57:12

looked at some charts related to the

57:14

2011 2012 you know, the capital less

57:16

recession or expansion in which you had

57:18

near zero interest rates, probably real turn

57:20

real zero interest rates and actually no

57:22

cappics whatsoever, right? And therefore, right now

57:25

at four or five percent you have

57:27

this push towards. re-industrialization. So it shows

57:29

that it is, you know, what would

57:31

benefit it from those low interest rates

57:33

is just gravity in the big pools

57:35

and speculative activity, but very little actually

57:38

meaningful profitable long-term investments. It's a very

57:40

good way to actually look into history

57:42

again and how how thinking about it

57:44

evolved. Part of serious problems that we

57:46

have right now of in balance is

57:48

exactly that near zero cost of capital

57:50

and some of those economies. So that's

57:53

that's on the market side in terms

57:55

of broader kind of thinking there is

57:57

the body in the mind by Mark

57:59

Johnson. So it's a. that goes very

58:01

very far back to my studies when

58:03

I did cognitive science is cognitive linguistics.

58:06

It's a kind of organizes way in

58:08

which we capture concepts, concepts such as

58:10

commodity market X, right? It's a concept,

58:12

a construct, and how it's done in

58:14

a certain schema, right? So you as

58:16

a subject versus the object, different roles

58:19

and events and how they're positioned and

58:21

what our perceptive. structure is like giving

58:23

that our perception and our consciousness is

58:25

embodied. So we are in bodies and

58:27

we have this experience and therefore we

58:29

function with certain type of matter for

58:31

us and I always say, okay, so

58:34

AI helps us translate everything very easily.

58:36

because all around this world we have

58:38

the same body. So our language is

58:40

structured in a certain way. But I

58:42

think if, you know, UFO ever lands

58:44

here and their bodies are more like

58:47

octopuses, then even if octopuses have sort

58:49

of convergence in their eyes, the eyes

58:51

are similar to us, everything else is

58:53

different. So their languages might not be

58:55

so easily translatable to us and it

58:57

will be in trouble. So yeah, that

59:00

was a really big one. There are

59:02

other names, of course, in that tradition,

59:04

but I probably leave it at that.

59:06

That's fantastic. Great range of books there.

59:08

One thing I want to mention, the

59:10

podcast you mentioned is tyranny today, not

59:13

tyranny now, tyranny today. Oh, sorry, tyranny

59:15

today. Yeah. And so I should actually

59:17

say, I was going to ask, what's

59:19

the best way for people to learn

59:21

more about what you're doing? Yeah, so

59:23

tyranny today is the is the podcast

59:25

in which I discuss broader issues and

59:28

of course for accredited investors, you know,

59:30

they're I run a fund in New

59:32

York City, but then of course is

59:34

for limited number of

59:36

people. I think the So

59:38

I think the

59:41

podcast is the best

59:43

way. Otherwise, they can

59:45

track me down down on

59:47

LinkedIn. That's excellent. So

59:49

with that, thanks

59:51

a lot. It's been

59:54

super informative to

59:56

go around every to go

59:58

around the world. and,

1:00:00

And, you know, good

1:00:02

luck of of the

1:00:04

holidays and everything.

1:00:06

And, you know, know, hope

1:00:09

you'll do really

1:00:11

well in in 2025 as

1:00:13

well. you, you, It's been

1:00:15

a pleasure. Thank

1:00:17

you. Thanks for having

1:00:19

me. Thanks

1:00:21

for listening to the episode. to Please subscribe

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