00:00I'm in Miami and I'm pleased to say that I'm joined by Nassim Taleb, a distinguished scientist of Universal Investments
00:06and the author of The Black Swan.
00:08Hi, Nassim.
00:08Hi.
00:09Honored to be here.
00:10So last time we spoke in October and since then we had a lot of volatility in the stock market
00:15and the price of gold has spiked by almost 30 percent.
00:19Let's start with gold.
00:20What is your take on precious metals now?
00:22So my point is I'm not making commentary on the price of metals.
00:27It's largely structural.
00:28The U.S. is progressively losing its status as a reserve currency.
00:34We still have transactions in U.S. dollars and people are storing them gold.
00:39It is a problem because we have a deficit and we need progressively more and more foreign investors.
00:46But the current administration hasn't been helpful because they ticked off both their friends and their enemies.
00:54So you don't have an incentive to store in U.S. dollars if you know that you could be, your
01:00asset could be frozen, you could have confiscation.
01:02It's not the right environment for storage in the U.S. currency.
01:08And so it's going to continue until we have more clarity about both the policy.
01:15Yes.
01:15So in terms of tariffs, by the way, we still have so much uncertainty related to the U.S. tariff
01:20policy.
01:21So on the one hand, we see that earnings are remaining resilient for U.S. companies.
01:26The economy is doing fine, but we do still see this K-shaped recovery.
01:31How big of a concern is that?
01:32The thing is, I'm not into short-term, again, commentary, but rather about structural risk and long-term effects of
01:41policies.
01:42The tariff policy, tariffs can be a smart thing.
01:46The execution of that is completely crazy and erratic.
01:49It doesn't give you an incentive to invest.
01:54So if you know that they're going to have tariffs permanently, you go invest in the sector, you don't even
01:59have that.
02:00They can change their mind.
02:02You know, again, an erratic administration is not helping.
02:06And plus, the tariffs are not selected in a way to be rational because they affect, now they affect a
02:13class of the population.
02:16That's, you know, it is a regressive tax.
02:20So we have, it's going to have an effect, if it doesn't have an effect yet, eventually it's a single
02:26show.
02:27On low-income consumers specifically, or just bigger economy, economic picture.
02:31Yeah, overall, you have a shift, you know, for more inequality.
02:39And this exacerbates it, and it's not helpful in the long run.
02:42And that shift for inequality has been exacerbated by AI.
02:46Let's talk about AI, by the way.
02:48So we saw a huge sell-off in the stock market, driven specifically by some AI names.
02:53What is your take?
02:54What's happening?
02:55Again, it's structural that historically, if you look at history, the car companies, airline companies, and, of course, the personal
03:03computer.
03:04Okay, if you look historically, those who started the business, the pioneers, are not necessarily the winners.
03:11As a matter of fact, they're probably more likely to be the losers.
03:16So now people take names of AI and say, okay, these are going to win, let's invest.
03:21I'm sure someone's going to make a lot of money in both software and hardware related to AI, but doesn't
03:30necessarily have to be these companies, because you have a lot of instability, both technologically and, of course, geographically with
03:38AI.
03:39So does it mean you expect bankruptcies in, let's say, software space?
03:44Definitely.
03:44Plus, the effect on the stock market, as you realize, that the previous rally that we had was driven by
03:51a very small number of names.
03:53And now we'll probably have some broadening, rebroadening effects on redistribution, but a lot of the gains in the stock
03:59market, okay, are going to be eradicated by that.
04:03So this is why you have, you know, we're at a juncture of a lot of instabilities across many domains.
04:10And by the way, Universal's annual return on capital is higher than 100%.
04:17Yes.
04:17So what's behind that?
04:18Well, the tail event, but you go ask Grok, Grok represents what we do a lot better than commentator and
04:26understands the nature of our strategy.
04:29Remarkably, you know, this is an area in which AI has been beneficial to us because they're very coherent in
04:37representing what we do for a living.
04:39You can ask, and we asked on Twitter, and it was very accurate.
04:42So basically, we work on hedging our clients against crises, and it's very nonlinear.
04:49We make a lot more during a crisis than we have exponential returns during these drawdowns.
04:56And even though the market comes back, we retain a lot of these gains.
05:01So considering everything that we have already seen in the stock market and this volatility, do you feel this volatility
05:08will continue and people still need to be hedged?
05:10You always need to be hedged because basically these drawdowns are not predictable, easily predictable.
05:18We don't have enough volatility compared to the risks involved.
05:23The risks are the tail risks that don't show early.
05:25As I said, we have a deficit problem.
05:28We have to borrow more and more money every year just to pay for past sins.
05:32And then we have this geographic instability, the geopolitical problem.
05:39I think that we're not safe.
05:43So let's forget about current volatility.
05:45It's not representative of the real tail risk that we are facing.
05:48And let's talk about geopolitics, by the way.
05:50One of the most important things that investors are watching, tensions between Iran and the United States.
05:57The main risk right now is that if Iran blocks the delivery of oil from the Gulf Coast, some people
06:04are saying that the price of oil can spike to as much as $100.
06:08How big of a risk is that for you?
06:10The first thing is it has been very hard in history, particularly with oil, to predict the effect on event
06:16on prices.
06:17I remember the first Gulf War, a lot of people were predicting a war by buying oil.
06:25And of course, the war was correctly predicted, but oil collapsed.
06:29So we don't know. Oil is very unpredictable.
06:31But let me say one thing here.
06:33The world today, the Western world, the United States and Europe, cannot afford another oil shock like the one we
06:42had in the 1970s.
06:44For those who remember what happened then, it's something, it's both inflation, stagflation that we had, inflation, commodity-driven inflation,
06:53that is not easy to remedy with monetary policy.
06:57So you can name anybody.
06:58You can bring Albert Einstein to the Fed that won't have an effect.
07:01So it's not a federal policy thing.
07:04So we have to worry about these episodes because you can't do anything about inflation and you also can't do
07:11nothing about the stagnation.
07:14So we have to worry about maybe we should talk to people in Washington to try to be less aggressive
07:19in the foreign policy.
07:20Interesting.
07:22And finally, what is the most underpriced risk today and what is the next black swan?
07:30By definition, black swan is what I don't see coming.
07:33But I would say the tail risk across all sectors are underpriced.
07:41They're structurally underpriced.
07:43They're even more underpriced now.
07:44I think because we can still face a rally in the stock market.
07:48So it's a tail risk, not a risk of drawdown in the stock market.
07:51It's a risk of a large drawdown.
07:54And that one is, I don't think, the stock market, I mean, look at the risks we're facing and we're
08:00at the juncture.
08:01And we have a government that is, I would say, maybe they're doing good things in some areas, but not
08:07good in risk management.
08:08And in terms of the global picture, which region you think is the most investable right now?
08:15I don't comment on, again, investment policies.
08:19But I would say, you know, ask me what I do with my funds other than my tail hedges.
08:26I'm in metals simply because I see a move, a structural and long-term move, hard to repress,
08:34and doesn't have anything to do with opinion or commentary.
08:37It has to do with central banks accumulating, BRICS countries accumulating more and more gold because they have no choice.
08:44Thanks.
08:44Thanks.
08:45Thanks.
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