Ray Dalio, Bubble Fears, & Nvidia’s Beat 11/20/25

Summary

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Squawk Pod: Ray Dalio, Bubble Fears, & Nvidia’s Beat

Episode Date: November 20, 2025
Main Hosts: Becky Quick, Andrew Ross Sorkin
Featured Guests: Ray Dalio (Bridgewater Founder), Christina Partsinevelos (CNBC), Emily Wilkins (CNBC)

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Overview: What Drives Markets—and Risks—Today?

This episode of Squawk Pod centers around Nvidia’s blockbuster third-quarter earnings, renewed questions about an AI-driven tech bubble, and a wide-ranging interview with legendary investor Ray Dalio. The hosts and guests dissect the implications of Nvidia’s outperformance, debate the sustainability of current market euphoria, and probe Dalio on the nature of economic bubbles, leverage, private markets, and the reliability of cash, gold, and crypto in turbulent times.
The tone throughout is inquisitive, energetic, and candid, with both evidence-based optimism and well-argued caution.

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Nvidia’s Monster Quarter: AI Hype vs. Bubble Concerns

The Results and Immediate Reactions

• Nvidia “blew out” expectations for Q3, calming investor fears and driving up major market averages.
  • “The biggest report of earnings season. It did not disappoint. The AI bulls are winning.” – Becky Quick [01:14]
• Despite prior market jitters, Nvidia’s results showed AI demand is robust and, according to Cantor Fitzgerald, even “underhyped.”
• CEO Jensen Huang and CFO addressed doubts about “AI bubble” talk on the earnings call, highlighting $500B-plus backlog, unmet demand, and enduring value in even older chips.

Detailed Analysis & Industry Implications

• Circular Financing Debate: Controversy persists about Nvidia’s investment in OpenAI (equity for supply deals), with questions about whether this constitutes “circular vendor financing.”
  • “Rather than giving up a share of our company, we get a share of their company and we invested in them in one of the most consequential...in a generation company.” – Jensen Huang (via Becky Quick quoting the call) [04:12–04:22]
  • Christensen: The OpenAI investment is not finalized, and details remain lawyerly, so “it’s not a done deal.”
• Depreciation of Chips: There’s industry confusion about how long Nvidia’s chips remain valuable. Some, like CoreWeave, now use a six-year depreciation; others, like Nebula, use four. MSFT’s CEO suggests layering old and new chips for extended utility.
  • “The useful life is not the issue...the question is unlike building railroads...you might need to constantly be upgrading.” – Becky Quick [07:43–07:49]
• Risk for Hyperscalers: While the model is brilliant for Nvidia, hyperscalers could face math problems if chip lifecycles are shorter than amortization periods, especially if margins don’t keep up.
  • “That’s fabulous for Nvidia but bad for everybody else and unclear whether then the math will make sense for them.” – Becky Quick [08:34]
• The Growing Competition: With hyperscalers like Google and Amazon developing their own AI chips, competition looms, though Nvidia’s CUDA software ecosystem remains a moat.
  • “Nvidia will say, well, they don’t have the Cuda software...that’s their winning recipe almost at this point.” – Christina Partsinevelos [10:53]

Market Impact

• Nvidia’s 5% stock jump = $225B in market cap—equivalent to the entirety of Disney or Goldman Sachs.
  • “A 5% move...is about $225 billion. That’s more than the equivalent of a Disney market cap...It means big deal not just for Nvidia but also for the major averages.” – Andrew Ross Sorkin [11:12]

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Policy Buzz: Federal Standards in AI Regulation

Legal Debate

• The White House is considering an executive order for a single national standard on AI, which would preempt state-level AI regulations. Trump openly supports this.
  • “A 50 state patchwork is a startup killer...federal legislation is essential. There’s no bigger issue for Little Tech...” – Mark Andreessen (via Emily Wilkins) [13:13]
• Critics like Sen. Brian Schatz warn against preempting state regulations before having robust federal rules in place.
• Congressional action to limit state authority over AI regulations may be bundled into must-pass bills but faces partisan gridlock.

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Spotlight Interview: Ray Dalio on Bubbles, Wealth, and Markets

What Makes a Bubble (And What Pops It)?

• “There’s definitely a bubble in markets...A bubble is that there’s a lot of creation of wealth from various ways...and then the question...is who needs the money?” – Ray Dalio [17:01]
• Dalio distinguishes between asset price growth driven by sustainable earnings and unsustainable demand—bubbles happen due to the urgent “need for cash” by holders.
  • “Bubbles don’t go happen because of good estimates of what in the future. It happens because of the need for cash. Do you sell that asset for cash for some reason?” – Dalio [18:20]

How Far Along Are We?

• Using his proprietary “bubble indicator,” Dalio says we’re about 80% of the way to the kind of bubble that characterized 1929 or 2000.
  • “If I was to show you the chart, it’s about 80% of where it was in those times. That doesn’t mean that’s the end of the move...Bubbles have to be pricked.” – Dalio [22:05]

What Pricks Bubbles?

• Classic cause: tight monetary policy (i.e., higher rates) or new taxes that force asset sales.
• Bubbles burst when wealth can’t be converted into money at today’s prices: owners need cash, must sell, and “too many claims on money” leads to rapid deflation in asset values.
  • “You have to sell wealth in order to get cash to buy things. And so when that happens, bubbles burst.” – Dalio [20:14]

Investor Takeaways: What To Do in a Bubble (And Timing Risk)

• Don’t sell just because a bubble exists.
  • “Don’t sell just because there’s a bubble…But if you look at the correlations with the next 10 years returns, when you are in that territory, you get very low returns.” – Dalio [24:03]
• Historical data suggest entering markets at high valuations results in lackluster decade-long returns.
  • “Over a 10 year period, your return is a delta between 2% and -2% a year over 10 years.” – Becky Quick (summarizing JP Morgan) [24:22]
• Diversification as Solution: Dalio advocates for a well-diversified asset allocation. Gold is emphasized as a key diversifier.
  • “You start off with what is a well-balanced, diversified portfolio. We talk about certain things like gold as being part of that...that mix. We can talk about gold, we could talk about these other assets. But I think that that kind of diversification.” – Dalio [25:47]

Views on Cash, Gold, Crypto, Debt

• Gold: The “second largest reserve currency.” Not dependent on counterparty risk, immune to certain technology risks, and especially valuable when fiat is debased.
  • “Gold is the second largest reserve currency. It’s money. So when it diversifies the portfolio, that is...an important element. It’s negatively correlated. It does very well in such bubbles.” – Dalio [26:20]
• Cash: Useful, but suffers from similar debasement and “money is debt”; be wary of US dollar exposure in the long run.
  • “I don’t like debt...I would rather be short debt in a sense.” – Dalio [27:17]
• Bitcoin: Dalio holds a small allocation (~1%), but isn’t bullish on its reserve capability due to surveillance and quantum/hacking risk.
  • “Bitcoin...not going to be a reserve currency for a major countries because it can be tracked...with quantum computing, controlled, hacked and so on.” – Dalio [30:18]
• Debt Concerns: US (and global) government debts are swelling; inability to tax, spend less, or sell bonds points toward financial strain and possible market/political instability.
  • “We have a debt problem. We have a value of money problem...I’m deeply concerned about that.” – Dalio [27:14, 28:38]

On Private Markets and Leverage

• Private equity deals are struggling: can’t sell, pricing is an issue, and private credit is highly exposed.
  • “If you’re looking at the private equity markets, they have a bunch of problems...can’t sell deals, pricing of deals, returns and so on. Can’t get cash out of them.” – Dalio [28:10]

Policy and Political Overhang

• Ongoing risk from political polarization/redistribution (wealth taxes, regulatory uncertainty) complicates the economic landscape nationally and globally.

Memorable Quotes

• “A bubble is an unsustained set of circumstances. It has unsustained amount of buying and has an unsustained amount of valuation.” – Dalio [23:31]
• “Too much wealth and not enough money is basically what happens. So the wealth just disappears and goes to wealth heaven.” – Andrew Ross Sorkin [34:05]
• “There’s always the best asset to hold during those times...it’s a combination of bonds and gold.” – Dalio [35:21]

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Notable Timestamps & Segments

• 00:00–01:00 Ads and show intro (skipped in summary)
• 01:04–12:22 Nvidia’s blowout earnings, AI bubble debate, chip depreciation, market reaction, and regulatory angles
• 16:23–36:00 Ray Dalio interview: bubble mechanics, leverage, diversification, risks in private debt/equity, gold/cash/crypto debates, and systemic dangers
• 12:22–14:23 National AI regulation, politics and tech lobbying

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Key Takeaways

• Nvidia’s earnings reinforce current AI optimism, though the path ahead may get bumpier as industry dynamics and competition shift.
• Dalio warns that markets are deep in bubble territory (80%), but history suggests bubbles can last much longer and become even more irrational before they burst.
• The greatest risk comes from liquidity crunches—not high valuations themselves—which force asset sales.
• Diversification, especially with allocations to gold and non-debt stores of value, remains Dalio’s top advice for weathering the next turbulent decade.
• Private markets and leveraged credit are a growing concern lurking beneath the surface of strong public market headlines.
• Policy remains in flux, with tech, finance, and politics increasingly intertwined in the AI and capital markets world.

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Transcript

[David Schwartz]

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[Becky Quick]

Bring in show music, please.

[Cameron Costa]

This is Squawk Pod and I'm CNBC producer Cameron Costa. On today's episode, Nvidia has reported its third quarter results.

[Becky Quick]

The biggest report of earnings season. It did not disappoint.

[Cameron Costa]

Blowing out expectations, calming investor jitters and boosting the broader markets.

[Andrew Ross Sorkin]

The very big deal for Nvidia. It means big deal not just for Nvidia, but also for the major averages.

[Cameron Costa]

Then one big interview with Ray Dalio.

[Ray Dalio]

Bubbles don't happen because of good estimates of what in the future. It happens because of the need for cash.

[Cameron Costa]

The famed hedge fund manager on AI hype and economic bubbles.

[Ray Dalio]

We are in that bubble territory but we don't have the pricking of the bubble yet.

[Cameron Costa]

A markets lesson from the legendary financier. Plus the red flags that he looks for in our economy.

[Ray Dalio]

If you're looking at the private equity markets, they have a bunch of problems.

[Cameron Costa]

It's Thursday, November 20th and Squawkpod begins right now.

[Becky Quick]

Stand Becky by in 3, 2, 1. Cue it please.

[Andrew Ross Sorkin]

Good morning everybody. Welcome to Squawk Box right here on cnbc. We are live from the NASDAQ market site in Times Square. I'm Becky Quick along with Andrew Ross Sorkin. Joe is out today.

[Becky Quick]

The biggest report of earnings season. It did not disappoint. The AI bulls are winning. Christina Parts and Ellis joins us right now at the table with more on Nvidia's third quarter results and maybe some more. The idea of the bubble can can continue to go a lot bigger.

[Christina Parts]

Yeah. And that was one of the first issues that Jensen addressed on the call. But Nvidia just showed exactly to your point how to calm those AI bubble fears. So much so that Cantor Fitzgerald is now saying AI is actually under hyped. Yes, they wrote that in their note. The CFO on the call said the $500 billion border book Jensen Huang announced back in October at GTC will quote grow. Saudi Arabia and Anthropic both added net new demand. So that's not included in that original 500 billion that was announced. Blackwell sales are quote off the charts and exceeding supply. The Q4 revenue guide of 65 billion be even high buy side whisper numbers. CEO Jensen Huang really pushed back directly on spending concerns right now. He said from Nvidia's vantage point they see something very different. Agentic AI is growing rapidly. And then he went after depreciation fears, perhaps amplified by Michael Burry recently by saying Nvidia's older chips don't become obsolete. Chips they shipped six years ago are still running at full capacity. According to him, even last generation chips are still selling strong in their third year. That line set many of the neo cloud players higher. Iron core weave nebulous you can see still up dramatically in premarket trading. The $100 billion open air investment though has raised some questions about whether Nvidia is essentially funding its own chip sales. You know that circular financing that's going on? Well, Jensen Huang defended that as well, saying they're not giving up equity in Nvidia, they're getting equity in OpenAI. Here's his comments.

[Becky Quick]

Rather than giving up a share of our company, we get a share of their company and we invested in them in one of the most consequential once.

[Ray Dalio]

In a generation company.

[Christina Parts]

I was going through the 10Q last night and it did show that Nvidia hasn't committed a specific amount to OpenAI and that the deal isn't finalized. Perhaps it's just lawyer speak to, you know, dot all of the I's and the t's, but for now it's not a done deal. The stock though, as you can see, trading much higher for now. Nvidia has answered those skeptics to your point, Andrew?

[Andrew Ross Sorkin]

Yeah, it is shocking when you look at the numbers. I was just digging through some of the stuff yesterday. We know it's big, we know it's growing fast. But there was a revenue chart that was in one of the stories I checked out. It was cnbc.com story and if you look at their revenue on a quarterly basis I think we've got the chart in the back too. The growth that they saw in revenue just from quarter over quarter is more than they were seeing on a quarterly basis 10 quarters ago.

[Christina Parts]

Yeah, two years ago.

[Andrew Ross Sorkin]

Two and a half years ago.

[Christina Parts]

But isn't it incredible too that the magnitude of the beat is expected to be 2 billion. So no matter what all of the estimates on either sell sides or buy size, it was minimum 2 billion. And then okay for the guy they beat by 3 billion. So even better. So that is how can they keep managing that magnitude of beats? And that is always an underlying concern now in today's market. But it's incredible how far we've come and how much they've grown.

[Becky Quick]

So the thing that I want to go back to your Open Air piece and just the equity piece, what I can understand about that is he doesn't consider it sort of vendor financing in that way simply because he's getting the equity for it. But that has to assume that the equity has extraordinary amount of value.

[Christina Parts]

Exactly, Exactly. And that 100 billion is, dare I say, an arbitrary number at this point because they don't actually plan on fully committing that full 10 tranches of. Yeah, according to the gigawatts that that open air produces. But he would defend it, saying that all of this is real demand. He's not going to agree to vendor financing, much like Core Weave CEO has said that this is real demand. And he actually said that on his earnings call and saying that they've sold out of a 1/ hundreds. H1 hundreds. Even the spot price for many of these rental GPUs has continued to climb despite them being a little bit older, which fulfills the narrative that people still want the old stuff.

[Becky Quick]

So, okay, speak to this because we talked a lot about this earlier in the week. This just the depreciation schedule for these chips because there's sort of a wide variance. Some people think that these things only really, it's not. They only work for three or four years. They can work for a longer time.

[Christina Parts]

Yeah.

[Becky Quick]

But they only have great value for some, for some people they may have to be replaced every three or four years because people are going to want the highest end stuff. And then the question is what kind of value can you get out of the stuff later? There's, there's other hyperscalers that are now putting it on their books and saying they can depreciate over six or seven years.

[Christina Parts]

Right.

[Becky Quick]

And that is, that's a huge distinction.

[Christina Parts]

So Corey has a six years, but it didn't Used to be six years, Nebula says four years. Microsoft CEO recently in a podcast spoke to that saying that how he can now take older chips and layer them on with newer chips and then you just, you know, you connect them with NV Link or whatever product you want to use and that maybe speaks to using these chips for a little bit longer. On the earnings call he said that there is still a useful life. The depreciation problem is not going away because you can either look at it as an accounting problem. How are you going to take it off your books over the X number of years or an actual useful life problem. And the argument from the CEO of Nvidia Corvey is that the useful life is very long.

[David Schwartz]

But.

[Christina Parts]

But it's the question of how are they the.

[Becky Quick]

No, no, I'm of the position by the way, the useful life is not the issue.

[Christina Parts]

I think counting is the issue.

[Becky Quick]

Not even. I think the question is unlike building railroads where you have tracks and you can continue to use the tracks. Yes. Maybe every 10 or 20 or 30 years you have to replace the tracks. You might because of just the way this business is moving. You might especially if you're in the large language model business or something else you might need to constantly be upgrading. It's the same reason that I'm getting a new phone every two or three years. The phone still works six or seven years later. I just don't want the phone six or seven years later because it doesn't work for me.

[Christina Parts]

It's not the latest and greatest.

[Becky Quick]

It's not just. But it's not just the latest. But if you're in the business of needing the most high end technology, which a lot of these guys may need.

[Christina Parts]

Business model for Nvidia that you're fabulous for Nvidia but bad for everyone else.

[Becky Quick]

Bad for everybody else and unclear whether then the math will make sense for them.

[Christina Parts]

But you keep buying it. Everyone keeps buying the phone. So the math is still making sense for you.

[Becky Quick]

And as long as you have buyers that no. So I'm look, it's fabulous for Nvidia but if, if you're Metta or take matter out of it, if you're open AI or Anthropic or a company that's not that not profitable yet. Yes. Then you actually will have a math problem.

[Christina Parts]

Then that's how Nvidia will is trying to go up the stack and you know, get everyone locked in on every single angle, not just the chips. Now they're going after anthropic. Why are they doing that? When anthropic right now may not be the most valuable customer because that's where they see the next leg of customers going forward. But you are a buyer still. So to your point, even years later and perhaps maybe you won't be the best demographic in terms of, you know, salary, all that but people are still buying the next greatest. Nike dunks your shoes upgrading their car. Right. There's. There's still a market for it despite. Despite how expensive it could be.

[Andrew Ross Sorkin]

Let's talk a little bit about what.

[Christina Parts]

This gain and markets on my answer on that.

[Becky Quick]

I see your eyes not totally so no, I know but it's more than I think it could put a lot of the big hyperscalers into trouble of course.

[Christina Parts]

And this.

[Becky Quick]

And then if, if the hyperscalers are in trouble, you don't have a buyer that's different than then why are that.

[Christina Parts]

And that's to why the hyperscalers are moving closer and closer to pushing out their own chips. And. And Google is the best example with Gemini 3 on the TPU's that these are the individual chips that they created themselves. It's not trained on Nvidia chips for the first time. And that's a big deal. Amazon too. Yeah, the Trainium chips. There's some debate on the quality for all of that but it's all about the patience of investors right now and the patience of companies. How much can they keep spending until they realize okay, these chips are costing too much, especially on an annual cadence. If Jensen Huang continues with putting out these chips every single year to your.

[Becky Quick]

Which then gets to the next piece which is. Which we haven't talked about at all. Which is. So we're talking about. This is great for video right this moment, right. At some point, whether you think Amazon's going to, you know, get their act together and make those chips to be the quality you think they should be or by the way, open I want to design its own chips, everybody, right? There will be huge competition at some point. And so they may get great value on the training end, but not on the inference end, for example or something like that.

[Christina Parts]

And then Nvidia will say, well, they don't have the Cuda software, which is exactly what he said to the depreciation argument that the Cuda software that they provide that has the most amount of developers right now, right now is their winning, winning recipe almost at this point because you need it to revamp all of the chips, etc.

[Andrew Ross Sorkin]

I just want to talk very quickly about what this means for the markets overall the stock is up by just under 5, 5%, 4.9%. That may not sound like a lot, but when you are talking about a company with more than four and a half trillion, trillion in market cap, 5% gain for them, which is where the stock is right now, is about $225 billion. That's more than the equivalent of a Disney market cap at $186 billion. It's close to the market cap of Goldman Sachs at $235 billion. So a 5% move in the market is a very big deal for Nvidia. It means big deal not just for Nvidia but also for the major averages. It was a big deal when that stock was down by about 4% in the first couple of days of the week leading into this. There were a lot of questions and concerns about whether they were going to deliver. They did. The market is up substantially and that is going to have implications throughout the rest of the major averages. President Trump wading into the debate over AI regulation and whether the US should have a federal standard. Emily Wilkins joins us right now. She has more on this story. And Emily, this has been complicated. It's not when they were able to pass into law. But this does change things, Becky.

[Emily Wilkins]

I mean, this is, it's been a complicated issue. It's been one that D.C. is trying to work on now for a couple months. They failed this summer. But there is a huge momentum under an effort to try again. And look the air industry, they would be notching a major win if the White House and possibly even Congress are able to somehow block states from enacting an assortment of AI laws in favor of that single national standard. Of course, Trump himself came out on Truth Social calling for that national standard to go in place. And that prompted Mark Andreessen to tweet that a 50 state patchwork is a startup killer. And he said that federal legislation is essential. There's no bigger issue for Little Tech, the builders who create the future for America. Now, that White House executive order that they're working on, it's not finalized yet, but a draft seen by CNBC would create a task force led by Attorney General Pam Bondi that would challenge some of these state AI laws under the grounds that they are regulating interstate commerce. And that's something the federal government has jurisdiction over. The draft executive order would also bar states from getting certain federal grants if they had AI laws that were not in compliance. Meanwhile, on the other side of Pennsylvania Avenue, Republicans in Congress, they're planning to use one of the upcoming must pass bills either on defense or funding the government to limit how states regulate AI. They're looking at things like maybe allowing states to regulate police fraud safety, but maybe stuff that's not AI development. However, any measure is going to require Democratic support and that is going to be an uphill battle for them. Senator Brian Schatz tweeted that any sort of ban on state AI laws was going to be a poison pill, adding that it's not like we are doing regulation and preempting states. We are preempting states and doing nothing. We'll be watching to see what, if any, final policy does come out of either the White House or Congress, and then to see if there are any states that are going to try to be pushing back on their ability to regulate AI. Andrew okay.

[Becky Quick]

Tease will be next.

[Cameron Costa]

Coming up on Squawk Pod, Bridgewater founder Ray Dalio what makes a bubble? What pops it? And maybe most importantly, what does an investor do about it?

[Ray Dalio]

Don't sell just because there's a bubble. Okay, okay, don't sell just because of bubble. But if you look at the correlations with the next 10 years returns, when you are in that territory, you get very low returns.

[Cameron Costa]

AI hype the gold advantage, private credit and market history. Hedge funder Ray Dalio is next. Our state has changed a lot in the last 140 years. We know because Multicare has been here guided by a single making our communities healthier that comes from making courageous decisions, partnering with local communities to grow programs and services, and expanding healthcare access to those who need it most. Together, we're building a healthier future. Learn more@ multicare.org.

[Keith Lansford]

This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and [e-mail] MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.

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Prices and participation may vary.

[Becky Quick]

Prices may be higher in Hawaii, Alaska.

[Keith Lansford]

And California and for delivery.

[Cameron Costa]

This is Squawk Pod with Becky Quick and Andrew Ross Sorkin.

[Becky Quick]

Here's Andrew now to our newsmaker of the morning. He is here joining us to discuss the markets, the History of economic bubbles Artificial intelligence so much more. Bridgewater founder Ray Dalio is with us. Good morning to you, sir.

[Ray Dalio]

Good morning.

[Becky Quick]

So you've been providing lessons for us for a very long time about economic cycles and where we are and what's going on. The big question in the market right now, because we're looking at Nvidia this morning and I think a lot of people are waking up thinking where's the market headed? Next has been this question of an AI bubble and curious where you ultimately come down. Are you with Jensen Huang who says he doesn't see it that way or do you see something else?

[Ray Dalio]

There's definitely a bubble in markets. Bubbles. What is a bubble?

[Becky Quick]

What is it?

[Ray Dalio]

What is a bubble? A bubble is that there's a lot of creation of wealth from various ways, such as you decide that you're going to have a sell $50 billion worth of stock and value it at trillion dollars or you have multiples like that and then you create the wealth that way. And then the question with all this wealth relative to money is who needs the money? So it's, it's a matter of who the buyers and sellers are. For example, if we had a wealth tax, right. Or you, if you had a tightening of monetary policy, then they has to be the selling of those assets. So in order to pay those things. So there's a mechanics of who owns it, is it over owned and so on. It's not the long term duration of the earnings. So you think about it. Isn't it interesting that we have such a short term reaction? It's great that what the results are. But this is a, it's valued as a long duration asset. So for 25 years, the next 25 years, it's very unknown. We don't know what's going to happen. And bubbles don't go happen because of good estimates of what in the future. It happens because of the need for cash. Do you sell that asset? Do you have to sell that asset for cash for some reason?

[Becky Quick]

Well, that's the question though.

[Ray Dalio]

So your book I thought did such a good example. I mean I thought by the way, your book is fabulous.

[Becky Quick]

Thank you.

[Ray Dalio]

But you take the 1929 and then you say what made it go up and what made it go down? And that dynamic is the way bubbles work. Right. And so if you take who has exposures, how much leverage is used and so on. This is about 80% into a bubble that was 100% would have been 1929 and 2000.

[Becky Quick]

So how much leverage do you think is supporting all of this? Because we, we were talking to parts of this in the last hour, and she was explaining this idea that Jensen Huang doesn't see a lot of the transactions that he's been doing. We're talking about these circular transactions where he's effectively taking an equity stake in some business and that business is then committing to buy his chips, if you will. Yeah, a form of vendor financing with sort of a equity overlay maybe is the way to think about it. Do you look at that and say, that's a problem, it's not a problem. Should we think about vendor financing in a different way? That was something that got a lot of the fiber guys in trouble in the late 90s, for example.

[Ray Dalio]

I think it's an issue, but I don't think it's the main issue. I think the real issue is who owns the stock. Is it in strong hands? Not, not, not just one stock. Isn't it amazing? We're talking about one stock for the stock market bubble and we're talking about for the economy bubble. So you have such a small percentage of the economy, such a small percentage of the American population in terms of wealth and so on. Concentrated. So concentrated. And everybody in it. And in a leveraged way, in various ways, it has leverage.

[Andrew Ross Sorkin]

What are strong hands? How would you define that?

[Ray Dalio]

Weekends would be the public.

[Andrew Ross Sorkin]

So retail investors are weak.

[Ray Dalio]

Right.

[Andrew Ross Sorkin]

Strong hands are the owners of these companies. The, the, the right.

[Ray Dalio]

In other words, strong hands is that they primarily invest their own money there. You don't have public. Right. The weekends is largely, let's say, a leveraged public and all united about that. That's, that's one of the key ingredients of a bubble. So it's not just pricing, because we have to find out. You know, your book did such a great job of looking at the wonderful companies in the 1920s and then enumerated how electricity came out and General Electric and RCA and so on. And those companies went down 90%, not because of the economy and so on. The bubble burst first because they needed cash. So what is. You have to understand that wealth can't be spent in order to. In order to get money. You have to sell wealth in order to get cash to get the money to buy things. And so when that happens, bubbles burst. So bubble bursting means, let's say a tightening of monetary policy is classic, but also something like wealth taxes can happen. For example, think about wealth taxes forcing sales of assets that you have to Europe.

[Becky Quick]

By the way, there's a proposal for wealth tax in California. Right?

[Ray Dalio]

Now. Yeah. So state and national. Right, State and national. I'm not, I'm just trying to describe the mechanics of a bubble.

[Andrew Ross Sorkin]

But you said we're at 80%.

[Ray Dalio]

Yes, there's. I have a bubble indicator that goes back to 1900 and it just makes, it has a number of indicators. How much leveraging, who has the leveraging? Is it, what is the amount of money in wealth relative to the amount of cash that needs to exist? And so on these indicators there are a number of them show that we're on that, on that chart. If I was to show you the chart, it's about 80% of where it was in those two times. That doesn't mean that that's the end of the move. Okay. Because bubbles have to be pricked, right? And so you can measure that. There's vulnerability, a lot of vulnerability. There's a lot of vulnerability of who's holding what.

[Becky Quick]

Here's my question to you about that, which is if the bubble is at this 80% range on your, on your, on your index or metric, there are folks, we had Paul Tudor Jones come in here a couple of weeks ago. He said, look, I think we're not about talking October of 1999, by the way. The market would still have 40% to go. Back in 1928, Charles Merrill, who founded Merrill lynch told everybody get out of the market. Because he thought it was a bubble. And he was right and he was wrong. Insofar as from the beginning of 1928 to September of 1929, stock market went up 90%. And so.

[Ray Dalio]

But I think when you're looking at that, you're looking at it incorrectly. Okay, what is a bubble is the definition, Right? I want to reiterate. A lot can go up before the bubble burst. A bubble is an unsustained set of circumstances. It has unsustained amount of buying and has an unsustained amount of valuation. It has. And then there's something that pricks the.

[Becky Quick]

Bubble is there is a way to sustain this.

[Ray Dalio]

You can't look at, you can't look at. Don't sell just because there's a bubble. Okay? Don't sell just because of bubble. But if you look at the correlations with the next 10 years returns, when you are in that territory, you get very low returns.

[Becky Quick]

JP Morgan just did a report on this that showed that if you got in at over 23 p. E multiple, typically over a 10 year period, your, your return is a delta between 2% and minus 2% a year over 10 years.

[Ray Dalio]

Yes, to your point, I Just put out today a post on this and you'll see the charts. And if you go on that. So I think that you have to say it's unsustainable. Then you have to go to the timing. What is it that pricks the bubble? Right. Typically a tight monetary policy. We're not going to have that now. Right. But. But you could have something. In other words, the need for cash.

[Becky Quick]

Right.

[Ray Dalio]

The need for cash is always that which bricks the bubble. Because when you have wealth, you can't spend wealth. You have to sell wealth in order to get the money to buy the things you need or pay the bills you have. That's the dump. So I think that the picture is pretty clear in that we are in that territory of a, of a bubble. We are in that bubble territory, but we don't have the pricking of the bubble yet.

[Becky Quick]

So what is a Ray Dalio? What is, what does the Dalio family do with its money in. At a point in this bubble of 80% and you still think it can go higher, but this becomes. Now it becomes a game of timing, which is always very difficult.

[Ray Dalio]

Of course. It's a game. And time. Well, elements of diversification. You know, I think you start off with what is a well balanced, diversified portfolio. And we talk about certain things like gold as being part of that other hope. There's a lot of ways to diversify. That's a whole other conversation of what you don't know. But I mean, I think that that's that mix. We can talk about gold, we could talk about these other assets. But I think that that kind of diversification.

[Andrew Ross Sorkin]

What about cash?

[Ray Dalio]

I think that, yes, gold and cash have negatively correlated real returns. So when you take. I believe that we have a debt problem. Okay, because we have a debt problem. We have a value of money problem. But, but that's right. If you just said if I held cash, but cash can also be gold. I think we have to realize that money is what is money. There's fiat money and then there's, you know, gold is the second largest reserve currency. It's money. So when it diversifies the portfolio, that is, I think, an important element. It's negatively correlated. It does very well in such bubbles. So when you think of cash, I think of cash as being a mixture of those.

[Andrew Ross Sorkin]

But you don't, you don't love the US Dollar is what you're saying, because you.

[Ray Dalio]

I don't. I don't like debt. I think debt assets have a problem. They're overheld and we're producing Too much the supply and demand is a problem. And so if I was to take my, you know, what is the tactical view, I would rather be short debt in a sense. Okay. And then that means that I'm what, what money do we have? I think a big question of our time is what money? What is money? What is a storehold of wealth? That's a big question too. There are these two big questions happening simultaneously. There is the AI question and then there's the debt question.

[Becky Quick]

We were talking about that a lot during this broadcast in the last couple of weeks about private credit and the like. Where is the leverage that we should be worried about, if we should be at all? Do you worry about private credit and how connected that is the banking system or not?

[Ray Dalio]

I think we have a challenge in private markets. If you're looking at the private equity markets, okay, they have a bunch of problems. In other words, can't sell deals, pricing of deals, returns and so on. Can't get cash out of them. And then also you're looking at venture, venture is having problems and a lot of private credit is connected to private markets.

[Becky Quick]

Right?

[Ray Dalio]

Okay. And I think that that dynamic is a risky dynamic in terms of there. But the government credit is what I'm most worried about. In other words, the devaluation, the supply and demand of that over the next three years. I'm deeply concerned about that. So debt and, and it's increasing because there needs to be more borrowing. You're seeing the hot companies now borrow money rather than raising.

[Becky Quick]

Your worry is just about inflation and the value of the dollar and therefore you hedge it through gold. We haven't talked about Bitcoin. Is that, is that how you think about it or are you thinking.

[Ray Dalio]

Yes, I think, I think debt is money and money is debt. What I mean, debt is money. When you're holding a debt instrument, you're getting a promise to get money and the value of that money makes the value of that debt. And the same is true. You hold money, what you're holding it in is a debt instrument. And so what you have is too much debt, particularly let's say the government debt. But other than the government debt, we're now creating the private credit. And you're also creating vehicles that are leveraging vehicles. In other words, five times the, an etf, that's five times the volatility of something else. That's the dynamic that, that, that I concern myself with. So that means then what is the money? What is the storehold of wealth? Okay. In terms of that, that type of.

[Becky Quick]

Would you buy Bitcoin?

[Ray Dalio]

So there's a supply demand. I have a small percentage of bill code. I've had for forever like 1% of my portfolios.

[Becky Quick]

But do you think you should have more? We keep watching.

[Ray Dalio]

But I think I've said the same thing over and over again about Bitcoin. I think the problem of Bitcoin is it's not going to be a reserve currency for a major countries because it can be tracked and it could be conceivably with quantum computing, controlled, hacked and so on and so forth. The advantage of gold is that it's an asset that you can hold and it's not. You're not dependent on somebody to provide it. That's why it's the most popular, not fiat currency. I do think that we think what is the problem is a debt problem. I mean particularly a government debt problem. And that's not true. Just of the us we're paying too much attention to the US if you look at what's happening in the uk, if you look at what's happening in France, number of countries they can't issue more debt, they're at a limit because the market won't have that. But they can't raise taxes because people leave when they raise the taxes and that hurts asset prices and so on. And then they can't cut spending. So what they do when you can't borrow and you're running big deficits and you can't do any of those, so you have these political changes that keep taking place. Each of those countries had five, four prime ministers last five years. So I think that we have these also large wealth gap issues, which means that there are billionaires and then there are these, let's say the top 10%, the minus 60%, the lower 60%. Then there's talk of wealth taxes. There's that issue that starts to enter this. There's not enough money around.

[Becky Quick]

Where I think the money is, MBS is here in the U.S. we've always looked at Saudi as this place that has all of this money, especially as they're trying to diversify their economy. And yet there's now a whole bunch of news stories and the like where people are saying maybe they're going to be challenged too.

[Ray Dalio]

Well, they're a new borrower, right. They have projects they want to spend.

[Becky Quick]

Right?

[Ray Dalio]

Okay. All these countries are new borrowers. So there's a lot of supply of debt.

[David Schwartz]

Right.

[Ray Dalio]

What are we going to think about the debt? Put yourself in those cycles. We have a political cycle, you know, There are these five big forces. I keep talking, right. The five big forces are the step, money, economy, force. There's a political. For left, right, wealth gap differences that is very relevant to taxes and what that will mean for the economy. There's a geopolitical force, okay. Then there's acts of nature and then there's technology. These are the five big forces. But when there's these interactions. So you can't separate the political from the financial that we're talking about. Right. So as we go ahead, let's say, for example, I think as we look ahead, it's like it's high risk that the Democrats will take the House. Okay? So now we're going to come into another kind of situation in terms of the political conflict is going to be very different. And that's happening at the same time as there are these imbalances. And so we must agree that there's this dynamic that's going on. Your book was so good in really vividly painting the picture, but if you look at that picture and just think about it is what are the mechanics? What caused the bubble? How did the markets go up? How did they go down? What was it, what financed it and what caused it to go down? I've looked at 35 cases of those like this. They all happen in the same way. So it's that dynamic. It's a confluence of a certain amount of debt that is existing and we know where it lies. And then there's the issue of the need to convert wealth into Spanish.

[Andrew Ross Sorkin]

It's too much wealth and not enough money is basically what happens. So the wealth just disappears and goes to wealth heaven. It never gets transferred into being money.

[Ray Dalio]

Yes. And if we look back to the Bible and the Old Testament and you look all of this, or you look back to banking, it's a lot of people walking around with claims on money. Okay. When the two claims on money become too great relative to the quantity of money, that's wealth relative to money, then you believe. Everybody who holds wealth believes that they can sell that money, that wealth and get money and spend it. Oh, yeah. Try it. So it's like it's that dynamic.

[Becky Quick]

But here's the thing that I'm concerned about, which is you talked about trying to, you know, diversify your holdings, but in every major, major moment that the markets have been quote, unquote, punctured and the bubble, it's hit everything almost across. Almost across the board and sometimes violently.

[Ray Dalio]

Well, again, I would say it depends on what it is we've done. I'VE done very well. Bridgewater has done very well in 2008 financial crisis and so made a lot of money. Okay. There's always the best asset to hold during those times.

[Becky Quick]

But if you really asset to hold.

[Ray Dalio]

Is during that time it's a combination of bonds and gold.

[Becky Quick]

Bonds and gold. Okay.

[Ray Dalio]

Right. Because one way or another real interest rates have to go down. So for example inflation index bonds are real interest rates go goes down, they go up and and the gold happens because they have to monetize. So if you look at that those correlations and take those spikes those are the things to have. So but even if you don't want to market time it just to have balance in the portfolio that's the most important thing I think.

[Becky Quick]

Ray Dalio, we want to thank you for being here. It was a fantastic conversation. Learned a lot. Learned a lot.

[Ray Dalio]

Thank you.

[Becky Quick]

Thank you.

[David Schwartz]

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[Becky Quick]

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[Keith Lansford]

This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and [e-mail] Market Update podcast or find Schwab Market Update wherever you get your podcasts.

[Cameron Costa]

That's the podcast for today. Thank you for tuning in. Squawk Box is hosted by Joe Kernan, Becky Quick and Andrew Ross Sorkin weekday mornings on cnbc starting at 6am to get the smart artist takes an analysis from our TV show right into your ears. Follow Squawkpod wherever you get your podcasts. We'll meet you right back here tomorrow Have a great day.

[Becky Quick]

We are clear. Thanks guys.

[David Schwartz]

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