Interest Rates to 10%: Why the Treasury Market is the Real Speculative Bubble (Not AI) | Russell Clark
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If I look at people 40 and under, those in their 20s and 30s, their number one problem is they can't afford housing. If you want to get housing back to some more reasonable levels, you need to have wages rising at about 7% a year, so doubling in ten years. And then you need to have the housing market be flat in nominal terms, so falling in real terms. So that requires you to have a real rate of about 3% so people keep their money on deposit rather than sticking to real assets. So that gives you an interest rate around 10%. And that's still my target for the treasury is a 10% yield. So the ques
This episode of Other People's Money is brought to you by the Tucrium Soybean Fund, ticker s o y b. Let's get into it.
Welcome to Other People's Money. I'm Max Sweetie, and I'm joined today by Russell Clark, a hedge fund manager based in London. Russell, thank you for coming on the show.
Thank you for having me.
You write a sub stack as well as as managing a hedge fund, and I have been reading and following. You put out an interesting piece in the last week. Looking at the AI trade, a lot of people are saying this might be the end of a big speculative bubble in this AI trade. But but you pointed to another asset class that you think is far larger and far more speculative. Tell me why you think this other much bigger market is really where there is a lot of risk right now.
Yeah. So I think Max, you're talking about the treasury market. There are two questions there. Is AI market speculative? And why do I think treasury markets are speculative, if that makes sense? So with the treasury market, I mean, normally, for me, if you look at any big bear trade that I've seen in my investing career and even before it, normally there were pretty good signs that things are going wrong, but people just happily ignored it, partly because it's human psychology. If there's a problem and you have to do something about it, it's always more comfortable just to ignore it if it hasn
So when you see those, like, five hundred year charts that say, well, the the reserve currency used to be the pound, and before that, it was another European currency. And we go all the way back to the Portuguese and say that people tie it to the strongest navy in the world. So you're saying that that that's not really how it worked going back? We weren't owning bonds or currencies of other countries like we do today?
So foreign reserve currency is very novel, right? That is a currency as a foreign reserve is novel. Gold used to be the only foreign reserve. And typically the country that had the biggest army had the most gold for various reasons. Basically, they went and took it from whoever had it. So if you lost a war, reparations tended to be big chunks of your gold reserve would be sent to whoever won, if that makes sense. And so when you looked at foreign, know, I think you're confusing foreign reserves with sort of like the main trading currency or the currency that was used for transactions, if that
Okay. So you think we're moving back towards a more historical period where hard assets, particularly gold, make up the bulk of foreign reserves or the concept of foreign reserves are really gonna go away?
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