Compiled edited by TechFlow
Guests: Raoul Pal, CEO of Real Vision; James Connor, Managing Partner of BloorStreetCapital
Podcast source: Raoul Pal The Journey Man
Original title: Raoul Pals 2025 Market Predictions ft. @BloorStreetCapital
Air Date: February 4, 2025
Background Information
In this podcast, Raoul Pal from Real Vision and James Connor from Bloor Street Capital discuss the key trends that will shape cryptocurrencies, stocks, AI, and the global economy in 2025. Can Bitcoin break the $500,000 mark? Is AI replacing human jobs faster than we expected? Whats next for interest rates, inflation, and the dollar?
(TechFlow Note: Real Vision Real Vision is a company focused on financial and investment education, providing high-quality financial content and analysis. Its goal is to help investors better understand market dynamics and investment opportunities.
Bloor Street Capital is a company that specializes in connecting companies with the right investors. We help companies connect with investors through online seminars, one-on-one meetings, and lunch presentations.
Topics Covered
Bitcoin and Cryptocurrency Price Predictions
The future of AI and automation
Stock Market Outlook and SP 500 Trends
Inflation, interest rates, and the Feds next decision
Trumps Economic Plan and Global Trade
Why This Is a Bull Market for Gold for Investors
Bitcoin Market Outlook and Price Fluctuation Analysis
James Connor:
Speaking of market performance, I know you are very bullish on Bitcoin in the long term, but I read in one of your recent interviews that you think Bitcoin will perform well this year, but with greater volatility. Can you elaborate on your view?
Raoul Pal:
Bitcoins performance is not only driven by global liquidity, but also closely related to the popularity of new technologies. This year can be determined to be a year of loose liquidity, especially because countries need to roll over a large amount of debt, which is usually very beneficial to the cryptocurrency market.
However, in the past few months, due to the policy adjustments of the Federal Reserve and the Treasury Department and the strength of the US dollar, global liquidity has tightened to a certain extent. This change has had a short-term negative impact on the performance of cryptocurrencies. However, this situation will not last long in terms of time or price. Once liquidity is injected back into the market, Bitcoins performance will improve accordingly.
Looking back at 2021, we can see that the pandemic caused the global economy to stagnate for a time, but then rebounded quickly, and the business cycle peaked early in April 2021. Typically, in the year of the presidential election cycle, the business cycle peaks at the end of the year. Bitcoins performance in 2021 is very complicated, but the current market environment is closer to the situation after Trumps election in 2017. At that time, due to continued liquidity injections, the market experienced a sharp correction of 25% to 30% at the beginning of the year and then rebounded quickly, and maintained strong performance throughout the year. The main driving force behind that round of liquidity injection did not come from the United States, but was led by China. I think that this year China may play an important role in global liquidity injection again.
Therefore, I expect Bitcoin to perform more strongly this year than many people expect. Although many investors are still worried about the market volatility in 2021, when Bitcoin experienced a rapid rise, collapse, rise again, and then collapse, I think this years market trend is more likely to be similar to the patterns of 2013 and 2017. So, yes, I remain optimistic about all risk assets this year, including Bitcoin.
Future predictions for Bitcoin price
James Connor: If Bitcoin hits $100,000, do you think it will pull back 25% to $75,000 and then continue to rise?
Raoul Pal:
I dont think Bitcoin will see a 25% drop. The market is more mature now, and with the launch of Bitcoin ETFs, market volatility has decreased. If the price of Bitcoin falls back from $100,000 to $90,000, I think this is a reasonable adjustment range and the price may stabilize around this level.
In the worst case scenario, I think Bitcoin could end the year at $250,000; in the base case, it could rise to $350,000. If the market sees explosive growth similar to 2017, Bitcoin could even break $500,000. Of course, there is a lot of uncertainty in this prediction, so I usually analyze different possibilities through a probability tree, listing the probabilities of various price ranges.
Overview of the current state of the global economy
James Connor: How do you view the global economy right now? Are there any concerns when you look at various regions of the world, whether its Asia, Europe or North America?
Raoul Pal: For the economic cycle, I would use the ISM survey of the Institute for Supply Management as the best guide, and it is generally flat. Although we see strong performance in the stock market and so on, the economy is still in a downturn. Normally, in a growing economy, the ISM index should be above 50. Although GDP is performing relatively well, there is still weakness in the manufacturing sector. Therefore, the economic cycle is still relatively slow, which leads to a divergence between technology stocks and the traditional economy. The performance of technology stocks is not based on debt dynamics or real-world spending, but relies on a very independent cash flow. The global traditional economy still appears weak, Europe has not yet recovered, the situation in the UK is relatively chaotic, and Canada is also slowing down.
Chinas Economic Dilemma and Debt Deflation
Raoul Pal:
China is currently facing a serious debt deflation problem, with bond yields falling sharply. Due to the weakness of the RMB, the Chinese government has difficulty implementing effective economic stimulus policies, and is also reluctant to lose control of the currency. At the same time, the world generally hopes that the United States can weaken the dollar, because the current strong dollar has put pressure on the economies of many countries. Normally, a stronger dollar slows down the development of the global economic cycle.
He also mentioned that Trump is likely to adopt policies similar to the last time after taking office to try to weaken the strength of the dollar. This is because the United States needs to balance its economy by exporting goods, and a strong dollar will reduce the international competitiveness of American goods, thereby exacerbating the trade deficit problem.
At present, the global economy seems to be in a no mans land and overall development seems slow. However, based on the liquidity injection and changes in financial conditions in the past six months, many forward-looking economic indicators show that the global economy is expected to recover significantly this year.
The profound impact of demographic changes on the economy
Raoul Pal:
As mentioned before, the dollar needs to depreciate moderately, and China also needs to free up policy space to implement economic stimulus measures, otherwise it will be difficult to effectively boost the economy. At present, Chinas debt deflation problem is similar to the challenges faced by many countries in the world: excessive debt levels and an aging population structure make GDP growth insufficient to cover debt repayment needs.
This situation has caused a series of serious problems. Chinas real estate market is experiencing difficulties similar to the US subprime mortgage crisis in 2008 and the European debt crisis in 2012. In addition, Chinas banking system is also facing similar structural problems. At the same time, the rapid changes in the population structure have further aggravated this situation. Aging and declining fertility rates have led to a sharp decline in population, thus putting greater pressure on economic growth and debt repayment capacity.
US Economic Conditions the Impact of Interest Rates on Economic Growth
James Connor: Ive observed that the economic situation in the United States seems to be somewhat similar to that in Canada, showing a polarized situation. On the one hand, some people are living quite well; on the other hand, many people are facing difficulties. Although the government claims that the economic or GDP growth rate remains between 2.5% and 3% and inflation is under control, the SP and NASDAQ stock indexes are close to historical highs, but it still feels that the economy is not as strong as it seems. Do you have other concerns about the US economy? How do you view the economic trend this year?
Raoul Pal:
I do have some concerns about the US economy, especially the current polarization. It is true that some people live in a prosperous world, but more ordinary people are facing the pressure of reality. Especially those who run small local businesses, their cash flow situation is still not optimistic. This is in stark contrast to the booming development of large technology companies.
In addition, although official data show that inflation has declined, the cost of living remains high. For example, when dining out, the impact of inflation is felt directly in the doubled prices. This high-price environment is very stressful for the average family. Therefore, I believe that policy measures such as lowering interest rates are necessary to ease the debt burden of ordinary people and stimulate economic activity. Ultimately, we need to rely on economic growth to solve these fundamental problems.
To me, growth means: interest rates need to be lowered, the dollar needs to be devalued, the US economy needs to be stimulated, and economic regulations need to be relaxed.
The implementation of these policies will inject more momentum into the economy in the future, although the GDP growth rate may not increase significantly. Currently, the trend GDP growth rate is around 2% or slightly below this level, but the recent trend shows some signs of rising. So, will the US economy accelerate further? Are there several periods of high growth of 3.5% possible? This is not impossible, especially when a new government takes office, it usually takes stimulus measures such as tax cuts. Given Trumps high attention to the economy, I am optimistic about the future economic outlook.
As for Europe, the challenges they face are completely different. Europe is currently taking the opposite approach to the United States, increasing regulations and taxes, which undoubtedly makes peoples lives more burdensome. However, Europe has a different social security system from the United States, and its economic structure is also different.
In addition, the performance of the Chinese economy is also crucial. China is not only an important market for US exports, but also a major buyer of global goods. If the Chinese economy is in trouble, its import demand is bound to decline, which will have a chain reaction on the global economy. Therefore, we need the global economy to regain its vitality.
On the one hand, the United States needs to implement the economic policies proposed by Trump; on the other hand, China also needs to find ways to solve its own problems in order to promote the recovery and growth of the global economy.
Forecast of future inflation trends
James Connor: Some people think the biggest risk in 2025 is that inflation accelerates again. I guess their concern is that tax cuts, tariff increases, deregulation, and deportation of immigrants may exacerbate inflationary pressures. What do you think about this issue?
Raoul Pal:
I dont think inflation will be a major problem in the future. Yes, as the business cycle recovers, there may be some inflation, such as the impact of rising oil prices, but overall, the impact of inflation is relatively limited. The main problem we are facing now is currency depreciation, which has pushed up asset prices and is still continuing.
At the same time, I think there will be a wave of technology in the future, and this technology has a strong deflationary effect. We may not fully understand the profound impact of this technology on the economy. Therefore, although the business cycle may bring short-term inflation, I expect that in this cycle, the inflation rate will first fall below 2%, and then it may rise to around 4% for a short time, but it will eventually fall back.
The deflationary effects of AI, robotics automation: how they will impact the job market
Raoul Pal:
I believe we are experiencing the most deflationary period in human history, and this trend is closely tied to the development of robotics and artificial intelligence. We are creating an unlimited labor pool at near zero cost. Take Amazon, for example, which now uses more robots than human employees. As one of the largest employers in the United States (perhaps second only to the postal service), Amazons robots can work 24/7, 365 days a year, without complaint, and without needing to take breaks.
Robots have no emotional problems, don’t complain, and don’t require additional costs such as human resource management. From an economic perspective, this means that companies are incentivized to rely more on technology than on manpower. This has become an indisputable fact. For example, in Tesla’s factory, almost all operations are done by robots; the situation in other modern factories is basically the same. Therefore, even if manufacturing is relocated - an issue that the Trump administration has strongly advocated - companies will not hire a large number of human employees. After all, this is not the 1950s. In todays world, as long as technology is cheaper and more efficient than manpower, companies will not hesitate to choose technology to replace manpower.
Financial Environment and Debt Cycle
James Connor: What do you think about the 10-year Treasury bond? Recently, the 10-year Treasury bond has performed very strongly, with the yield rising from 3.60% in September to the current range of 4.64%-4.70%. And all this happened against the backdrop of three consecutive rate cuts by the Federal Reserve. What does this mean? Are you concerned about the rise in the 10-year yield?
Raoul Pal:
I do worry because it suggests financial conditions are becoming more strained. Also, the rise in the 10-year yield has become decoupled from inflation expectations, suggesting that the problem is not inflation itself.
In fact, every four years, the governments of major countries in the world need to refinance their debts, and we are in such a cycle. I call it the Code Cycle of Everything. Looking back at 2008, the world experienced a debt amnesty because interest rates were reduced to near zero. This low interest rate environment allowed governments to pay almost no interest for a period of time, which was equivalent to providing a breathing space for debt. In other words, the policy at the time was like telling governments: Dont worry about the interest problem, just focus on dealing with the debt. So countries restructured their debts into three to five years.
This also means that every four years or so, we will enter a critical node for debt refinancing. Since 2008, this four-year cycle has become a regular cycle, which has had a profound impact on the global economy.
But this time the situation is somewhat special. The timing of the interest rate cut has been seriously delayed due to the impact of the epidemic and inflation. Normally, at this stage of the economic cycle, interest rates should be lowered to a level close to the GDP growth trend, such as 2%. But the reality now is that they cannot do this. The result is that debt is accumulating in the form of new debt, because governments have to issue new debt to repay old debt. This debt-to-debt model is brewing a debt crisis, which is why they urgently need to lower interest rates.
This situation has led to a massive issuance of debt, and at some point the problem will explode and governments will have to take action. In fact, this is not just a problem for certain countries, but a global problem. For example, interest rates in the UK have climbed to a 30-40 year high. In a highly indebted economy like the UK, this high interest rate level cannot be maintained for a long time, so governments must take measures to deal with it.
One possible solution is to implement Yield Curve Control. This means that the government will not completely waive interest payments on the debt, but will control the cost of debt by setting a cap on the interest rate on government bonds. In addition, they may have to restart quantitative easing (QE) to inject more liquidity into the market. The current liquidity crunch has led to a decline in market demand for bonds, which is why a large amount of debt cannot be absorbed by the market.
Another problem is that the strength of the dollar has made it much more expensive for countries like Japan, China and Europe to buy U.S. Treasuries. So the high valuation of the dollar not only exacerbates the debt problem, but also forces them to take measures to devalue the dollar and lower interest rates at the same time. I think this will help ease the pressure on the 10-year Treasury yield. Trump has publicly stated that current interest rates are too high, and I believe Scott Bessen’s first priority will be to solve this complex challenge.
The link between interest rate policy and Trump’s economic agenda
James Connor: So where do you think interest rates are going to go? Will the 10-year Treasury yield hit 5%? If so, what impact will that have on the stock market?
Raoul Pal:
If we talk about the divergence in the stock market, I think that rising interest rates will hardly have much impact on companies like Google, Apple, Meta, and OpenAI. These companies have a compound annual growth rate of 30%, and even if the interest rate rises to 5%, it will not be a problem for them. More importantly, these tech giants hold a lot of cash, and rising interest rates will make them earn more, which is often overlooked. Therefore, I am not worried about these companies being affected.
Of course, if inflation picks up, the discounted cash flow value of these companies may need to be reassessed, but a simple increase in interest rates will not be a problem. What is really affected is the general economy, which creates a market bifurcation. I expect the 10-year Treasury yield may climb to 5% or even 5.5%. Therefore, I think Trump may take measures to put pressure on to ease this situation as soon as possible.
Another complication to consider is that Trump wants to renegotiate trade deals with various countries, including Canada, China and Europe. A strong dollar is his main tool to pressure other countries. Because these countries also hold a lot of dollar debt, the strength of the dollar will increase their debt repayment costs. Trump may use this to exert pressure while offering something in return, such as the United States will provide certain concessions by lowering the dollar exchange rate if these countries agree to adjust tariffs or reduce trade deficits. This strategy can both strengthen the United States negotiating position and help ease domestic economic pressures.
The Dollars Move and Its Impact on Trade Deals
James Connor:
I simply cannot understand why the US dollar is so strong, especially compared to the Canadian currency. The Canadian dollar is currently at a 22-year low and has fallen 10% in 2024 alone. So, how exactly can the United States devalue the dollar?
Raoul Pal:
In fact, if the United States clearly sends a signal that it wants the dollar to depreciate, it usually has a certain effect. Another way is to inject liquidity into countries such as China and Japan that hold a large amount of dollar debt by providing swap lines. This is equivalent to directly providing dollar support to these countries, and they can use these funds to buy back U.S. Treasury bonds. The way this mechanism works is that the United States provides dollar loans to the global financial system through the Federal Reserve System to alleviate the dollar shortage problem in these countries. In the end, these countries will reinvest their dollars into the U.S. Treasury market, creating a win-win situation.
You may ask, if there is such a mechanism, why doesnt the United States promote it? Why is the dollar still so strong? The answer is that the United States currently wants to maintain a strong dollar. The main purpose of a strong dollar is to take the initiative in trade negotiations, especially when renegotiating trade terms with other countries.
Trumps Economic Policies Inflation Risks
James Connor:
I thought Trump would do everything he could to keep economic growth between 2.5% and 3%, pushing the SP 500 and Nasdaq close to all-time highs, and stimulating the real estate market. But at the same time, he also plans to implement tax cuts, tariff increases, and deregulation, policies that could theoretically bring inflationary pressures. Assuming that these policies are indeed inflationary, this could lead to higher interest rates and a stronger dollar. However, Trump also wants the dollar to depreciate in order to attract manufacturing back to the United States and further promote economic growth. There seems to be a contradiction between these goals. What do you think?
Raoul Pal:
One of the core of Trumps policy is the energy relationship with Canada, which is actually closely related to oil. Trump knows that Scott Bessons strategy is working. Although the current oil price is not high, low oil prices are essential for the operation of the economy. They hope that Canada can increase oil production as much as possible, including promoting key energy projects such as the Keystone Pipeline. These energy policies can not only promote US economic growth, but also alleviate the pressure brought by the strong dollar to a certain extent.
First, there are many variables in the economy. Some factors can cause inflation, some problems take a long time to resolve, and others can be addressed with simple means. For example, stimulating asset markets through the Federal Reserve or the Treasury Department to increase liquidity is a relatively direct and easy-to-control solution.
Governments may want to promote economic growth by relaxing regulations, but at the same time they need to avoid excessive inflation. To this end, they may try to control commodity prices to achieve this goal.
As the business cycle recovers, the return of inflation seems inevitable. The key question is whether this inflation will be non-cyclical, structural (such as the long period of high inflation in the 1970s, which is often mentioned), or whether it is just a normal business cycle fluctuation, that is, inflation will rise for a short period of time and then gradually fall?
It is worth noting that the last time tariffs were implemented, there was no noticeable inflation, suggesting that tariffs do not necessarily lead to higher prices across the board, as exchange rate fluctuations can offset the impact of tariffs to some extent. So the picture is not as clear-cut as it seems.
Looking back at similar policies adopted when Trump took office, the dollar fell sharply in the second week of January, while bond yields rose for the same reason. These phenomena all have certain inflationary characteristics, but then bond yields gradually fell over the next 18 months. This shows that the market often misjudges policies due to advance expectations.
One of the key points you mentioned is when will large-scale tariffs actually take effect? Usually, these policies take a long time to implement, maybe 18 months to two years. Therefore, tariff increases are usually gradual rather than all at once. Although many people think these policies will take effect immediately, this is often not the case.
Market Liquidity and Stock Market Trends
James Connor: 2023 and 2024 were two outstanding years, with the SP 500 up 25% to 30% in each of those years, and your investment also performed amazingly in 2024, with a gain of 150%. Do you think the SP 500 could have a third outstanding year?
Raoul Pal:
I think the answer can be found in the performance of the Nasdaq. 97.5% of the correlation of the Nasdaqs movements is driven by liquidity, which shows that the core driving force of the market comes from the policy actions of the Federal Reserve and the Treasury, such as the Treasurys general account, reverse repo operations, and balance sheet adjustments. In addition, the policy measures of various governments are also crucial. Therefore, global liquidity is a key factor driving the market.
If we know that there is $8 trillion to $10 trillion of debt that needs to be rolled over this year, and the bond market is already showing stress, the government must inject liquidity to ease the situation. From a probability perspective, we are likely to see a lot of liquidity enter the market. In addition, Trump has always supported high asset prices, which means that there is a high probability that the stock market will continue to perform strongly this year. Of course, the market may fluctuate, even more violently than last year, but this trend will not change as long as the government continues to roll over debt. Countries such as Europe, China and Japan are also facing similar debt pressures and need to respond by injecting liquidity.
For the government, the first priority is to roll over debt, which is the key to maintaining market stability. If the bond market collapses, the entire financial system will fall into crisis. To this end, the government needs to inject more liquidity, which will further push up asset prices and also improve the governments image to a certain extent.
NVIDIA and Market Valuation
James Connor: What do you think about the valuation issue? For example, Nvidia is one of the representative companies in the current market. As far as I know, it has risen by as much as 170% in 2024. Are you worried that the valuation of Nvidia or other companies is too high?
Raoul Pal:
In general, the P/E ratio has been rising. The main reason behind this is the impact of currency depreciation. Although prices continue to rise, the growth rate of corporate earnings is usually limited by the performance of GDP. For example, if the currency depreciates at a rate of 8% per year, and the annual growth rate of GDP is only 2%, then the companys earnings growth rate may only be 2% or even lower, assuming a nominal GDP growth rate of 5%. This means that the rate of currency depreciation has exceeded the rate of earnings growth, causing the P/E ratio to continue to rise. Therefore, evaluating the market based solely on the P/E ratio may not be completely accurate.
In addition, people may have overly high expectations about the impact of technologies such as AI on corporate revenue. Looking back 10 years ago, Amazons price-to-earnings ratio was as high as 600 times, but it still proved to be an excellent investment case. Therefore, the key lies in the growth rate of the company, not a single valuation indicator.
Overall, I think this year will be a good year. Market valuations may rise significantly. However, after the debt rollover is completed, liquidity usually tightens because inflationary pressure may re-emerge. This liquidity tightening often triggers a market correction.
In this case, the market may experience some degree of correction and then re-enter the growth cycle. I expect valuation levels in this cycle to reach a higher range, and although there may not be a big correction, the market may go sideways for a while or experience a decline of about 15%.
In the next cycle, cutting-edge technologies such as AI, robotics, self-driving cars, and Mars missions will gradually show their potential. These technologies will become the core driving force for a new round of market prosperity and lead us into a complete bubble cycle. At that time, we can further think about how the market will evolve after the bubble bursts. I think this gold bull market will last at least until the end of this century.
Analysis of gold market trends
James Connor: So what do you think about the performance of gold?
Raoul Pal:
Golds performance is also affected by currency depreciation. However, unlike other assets, gold does not have a technology adoption curve, so its gains are usually not as significant as risk assets. However, in the current liquidity cycle, countries need to repay debts through currency depreciation, which is a positive factor for gold.
Therefore, I remain optimistic about the market outlook for gold. I think gold will continue to perform well in the next market cycle. Especially when the US dollar starts to weaken, this will further drive the price of gold up. Overall, I think the current market is not only a very good gold market, but also a favorable market environment for most risk assets.
Outlook for investment and financial opportunities in the next five years
James Connor:
You mentioned in many online interviews that we still have five years of golden period to seize opportunities and make money. I remember you mentioned this point when talking about topics such as artificial intelligence and robots. What exactly do you mean?
Raoul Pal:
As a macro investor and analyst, my job is to look ahead and try to predict where the world is headed. Since 2000, I have used an analytical framework that focuses on debt, deflation, and demographics. This framework has helped me stay on track during the financial crisis and the European debt crisis, and has allowed me to better understand the logic of the global economy.
However, I did miss the wave of the rise of technology in the early days. When I re-examined it, I found that our economic model has long been driven by scarcity. As the economy shifted from manufacturing to services, the importance of professional knowledge gradually became prominent. This is why the salary levels of lawyers, accountants, financial advisors, doctors and other professional fields are high, because the supply of these services is limited, but the demand is very strong.
AI’s disruptive changes to traditional industries
Raoul Pal:
However, artificial intelligence is changing all of this. The development of AI is significantly reducing the marginal value of knowledge. Although many people have not yet realized it, knowledge itself is becoming cheaper and cheaper. For example, as a content creator, it may have required a lot of resources to build a media company in the past, but now it is no longer necessary. Similarly, the cost of making a movie may drop from $100 million to $5 million or even $2 million, which is a typical example of how AI reduces production costs.
In manufacturing, the introduction of robotics is replacing manpower. And the most expensive part of manufacturing is labor. So, will it completely replace labor in the future? The answer is that although AI will indeed lead to the loss of many jobs, the supply and demand relationship in the labor market will be balanced due to the aging of the global population.
The question I am more concerned about is, when AI starts to replace us, what does this mean for your business or my business? If artificial super intelligence (ASI) appears in the future, what impact will this have on financial markets? As investors, when AI is more efficient and accurate than us, will we be replaced? Will financial markets continue to be driven by human emotions, or will they be taken over by machine logic and algorithms?
Furthermore, we are now living in a revolution where software is eating the world. With the popularity of SaaS software, this trend is very close to reality. For example, if you develop a perfect platform to provide financial advice, I can copy your platform in just a few minutes and adjust it to comply with the regulations of the Indian market. The convenience and efficiency of this technology is completely changing the industry landscape.
The profound impact of AI technology advancement on the economy
Raoul Pal:
What models do we have in business? What models do we have around getting paid for knowledge? These models are scalable everywhere. So humans will always find new ways to make a living. I think online communities might be one of them because humans are inherently social creatures and they need to interact and communicate with other people.
However, the world is changing fundamentally in a way that we can hardly imagine. In fact, we have never been the top creatures of the intelligence pyramid. If you look at the development of artificial intelligence, the IQ of AI has almost doubled from 90 to 157 last year. If it doubles again next year, its IQ will reach 300, surpassing any human intelligence record. And in the next few years, it may continue to double to 600, 1200 or even higher.
We don’t fully understand how these changes will reshape the world, and society may experience upheaval as we enter this era of radical change. But at the same time, it will also bring huge opportunities—it’s just that these opportunities may appear in forms that we haven’t yet understood.
Wealth accumulation strategy to 2030
Raoul Pal:
In my opinion, if the global economy still relies on rolling over debt, devaluing currencies and driving up asset prices, then we should seize this window to accumulate as much wealth as possible. When we enter the early 2030s, the world will change in a way that is difficult for us to understand, and even the research methods of traditional economics may no longer apply. By then, we need enough wealth and security to cope with the unknown business environment, because we cant even predict what the future business model will look like.
This high level of uncertainty may be a huge stress for many people, but we are in the middle of the biggest macro-risk investment opportunity in history. Especially in the technology and cryptocurrency sectors, which are at a critical stage of the technology adoption curve and are closely related to the trend of artificial intelligence replacing humans. It can be said that we are actually investing in our own downfall, but this also creates huge wealth opportunities for us. Although there will be cyclical fluctuations and risks, this will better adapt us to the coming changes.
How do college students plan their future career development? How do they deal with industry changes when choosing a career?
James Connor: What advice would you give to college students?
Raoul Pal:
First, when choosing a career, it is better to enter industries that are in the trend rather than against it. I chose to enter the banking industry and focus on serving hedge funds. It was the 90s, when the financial bubble reached its peak and it was also the golden age of hedge funds. I caught two important long-term trends and made my career. On the other hand, now if you choose the finance or consulting industry, you will face headwinds because many jobs in these fields may be replaced by technologies such as artificial intelligence. Therefore, I recommend choosing industries with long-term growth potential, such as artificial intelligence, robotics, and cryptocurrency.
In addition, I also recommend that young people face the uncertainty of the future by traveling more and exploring different cultures and people. Because in a machine-dominated world, the most important skill is humanity. This experience will help you better understand the importance of interpersonal relationships, and interpersonal skills will become extremely critical in the future. I believe that the more people who can show human qualities, the more likely they are to find their place in a rapidly changing environment, because the future business model will undergo a huge transformation.
If you want to go into business and have big goals, choose industries that are growing at 100% per year. These industries are full of opportunities and worth investing in, while those that are stagnant are not recommended. Of course, if you want to open a restaurant, this is also a good choice because dining is part of the human experience. Similarly, areas such as tourism and travel also reflect the core value of the human experience.
In summary, either choose an industry that is closely related to human experience or invest in the field of technology. Try to avoid those middle grounds that have neither growth potential nor human value, because their prospects are no longer clear.
Potential risks to global financial stability
James Connor: In general, you are very optimistic about the US economy, the US market, and Bitcoin. But if you want to talk about a potential risk that many people ignore, what do you think it is? After all, when the market has a large retracement of more than 25% or 30%, it is often due to some unexpected factors. If there is such a risk, what do you think it is?
Raoul Pal:
I think the potential disintegration of the European political system is probably a major risk that is being overlooked. We have observed that the political systems of many countries are gradually rejecting traditional politicians, and this trend is beginning to emerge in countries such as Canada. Will this force structural changes in the EU itself? And what impact will such changes have on global trade? This is a very important question, but few people think deeply about it. In contrast, some of the frequently mentioned ones are known risks and are not what I worry about most.
In fact, when faced with these crises, the response strategy of governments and central banks has almost always been to print a lot of money to solve the problem. Whether it is the collapse of the Chinese economy, Chinas invasion of Taiwan, another global epidemic, or Europe falling into chaos, the solution always seems to be to inject liquidity into the market and reduce the possibility of extreme negative events (i.e. left tail risk). Recall that the most shocking event was the global shutdown in two to three months due to the epidemic. How did the market react? Although there was a sharp drop in the short term, it soon rebounded quickly due to the huge amount of money injected by the government. This model has proven to be effective in both the 2008 financial crisis and the 2012 European debt crisis.
As a result, we now live in a completely new financial environment. In this environment, investors are forced to hold risky assets because the government has effectively eliminated long-term downside risk by injecting liquidity. Of course, this does not mean that the market will not experience volatility. For example, in a year with low liquidity, the Nasdaq may fall by 30%, and long-term assets may fall even more. But such pullbacks usually do not last long because the government will act again to inject liquidity and drive the market back to health.
