WSJ : Women Interviewing for Bill Gates’s Private Office Were Asked Sexually Exp

Women Interviewing for Bill Gates’s Private Office Were Asked Sexually Explicit Questions
Female job candidates say extreme vetting process by a security firm sometimes included questions about pornography and sexual histories; Gates’s office says such questioning would be unacceptable

Some people who sought jobs at billionaire Bill Gates’s private office described going through an extensive screening process that included being questioned by a security firm about their sexual histories, past drug use and other parts of their private lives that might indicate they were vulnerable to blackmail.

Some female job candidates were asked whether they ever had extramarital affairs, what kind of pornography they preferred or if they had nude photographs of themselves on their phones, according to the candidates and people familiar with the hiring process. While it couldn’t be determined whether any men were asked such questions, none who spoke to The Wall Street Journal said they had.

Female candidates sometimes were asked whether they had ever “danced for dollars,” some of the people said. One of the candidates was asked whether she had ever contracted a sexually transmitted disease, according to the candidate.

A spokeswoman for Gates said his private office, Gates Ventures, hasn’t heard about such questions being asked during background checks done by third-party contractors. “This line of questioning would be unacceptable and a violation of Gates Ventures’ agreement with the contractor” who must comply with pre-employment screening laws, she said.

The people said the screenings were conducted in recent years by a security consulting firm called Concentric Advisors, and the interviewers were ultimately trying to find any information that had the potential to be used to compromise or blackmail individuals who would be working closely with one of the world’s richest men.

Concentric said its protocols comply with applicable laws.


Gates himself also has had multiple extramarital affairs and had meetings with Jeffrey Epstein, a convicted sex offender, the Journal has reported. Gates has said it was a mistake to associate with Epstein.

Employment lawyers and security consultants said the process these people described could run afoul of state and federal employment discrimination laws. For certain high-security government roles, such questions may be more acceptable, they said.

Carol Miaskoff, legal counsel of the federal Equal Employment Opportunity Commission, said any questions about a candidate’s health or psychiatric history before a job offer “is just flat out prohibited by the federal Americans With Disabilities Act” regardless of who does the questioning during the application process.


Concentric says on its website it has worked with private family offices for almost two decades. It cites work including pre-employment background checks and due-diligence investigations.
Questions related to past illegal drug use could violate the same law since they may reveal an addiction, which is considered a disability, she said. Instead, Miaskoff said an employer can ask if a candidate is currently using drugs illegally or get consent for a drug test.

“There’s not a black letter law prohibition on asking questions related to sex,” Miaskoff said, but “getting the information and taking some adverse action with that information” such as rejecting the candidate could lay the basis for a legal challenge.

The Gates spokeswoman said Gates Ventures, which was previously known as bgC3, follows careful due diligence when hiring staff and that it works with contractors to perform industry-standard pre-employment screenings for men and women. She said it requires all vendors to operate in compliance with state and federal laws and regulations.


“We have never received information from any vendor or interviewee in our 15+ year history that inappropriate questions were asked during the screening process,” she said in a statement. “We can confirm, that after a comprehensive review of our records, no employment offer has ever been rescinded based on information of this nature.”

Concentric CEO Mike LeFever said that the company provides industry-standard background checks for hundreds of companies and its pre-employment interview protocol, which is identical for men and women, is compliant with laws in each state and nation where it provides services.

Asked how questions about sexual or medical histories comply with laws, a spokesman for Concentric denied it initiated such questions and said such information can be volunteered by job candidates when asked about public records. The Concentric spokesman said the company doesn’t provide hiring recommendations as part of its security-screening business.

The security screening involves “assessing a candidate’s truthfulness and vulnerability to blackmail, which often starts with voluntary statements by the candidate with follow-up questions by company interviewers,” the spokesman said. Not all information discussed in a Concentric security screening is included in the reports it provides to clients, he said.

Job candidates disputed Concentric’s characterization, saying they were asked about sensitive information and didn’t volunteer it. They said they were informed their job offers were conditional on passing the assessments. Documents are at odds with the contention that the screening process wasn’t for hiring.

A consent form, reviewed by the Journal, said a behavioral assessment by a Concentric professional would be used to “assess suitability for employment” by Gates’s private office and would include drug and alcohol history as well as past medical and psychiatric history as it relates to the job.

The form, requiring a signature from the job candidate, gave permission to disclose the results from the assessment to Gates’s private office, including “highly sensitive information,” and “does not allow for the re-disclosure of sexually transmitted diseases,” the document shows.


Some people who worked for Gates’s private office said they didn’t undergo such questioning.

Gates himself was investigated in 2019 by Microsoft board members over allegations of a past sexual relationship with a Microsoft employee. Epstein appeared to attempt to blackmail Gates in 2017 over a different affair with a Russian bridge player, the Journal has reported. Gates’s spokespeople have said that he had a consensual relationship with the Microsoft employee about two decades ago, and that Epstein tried unsuccessfully to leverage the past relationship with the Russian woman.

The Microsoft co-founder has hundreds of people who work for several entities he controls, including Gates Ventures, private aircraft, horse stables and a company that oversees household staff and security. These workers are hired directly for these entities and they aren’t employees of the Bill & Melinda Gates Foundation or Microsoft.

Concentric describes itself as a risk-management firm that has several former Central Intelligence Agency and Federal Bureau of Investigation officials on its staff. It has worked with private family offices for almost two decades, providing pre-employment checks and mitigating risks posed by individuals with “potentially nefarious motives,” according to its website.

Concentric’s headquarters are in the same lakefront office park in Kirkland, Wash., as Gates Ventures.

Informally, Gates employees would warn job candidates that a “former CIA agent” would be drilling into medical information, past drug use and relationships, including former sexual partners, some people said.

Employment lawyers said questions about a job candidate’s medical or psychiatric history are illegal, even if part of a security screening for a private office. If a job candidate signs a consent form, it doesn’t make the questions legal, they said.

Questions about a candidate’s sexual history or preferences are “deeply offensive and it has nothing I can conceive of whether a person can do a job,” said Lindsay Halm, a Seattle-based employment lawyer. “I suppose if you’re working at a sex toy store or an adult film store where you might conceivably have a job-related question about that.”

A typical pre-employment background investigation includes an examination of public records and databases, confirmation of resume content and reference checks in addition to an interview confirming job qualification details, the applicant’s background and whether the candidate would be a good fit for the company, said Daniel Karson, a security industry veteran and former executive for business investigations firm Kroll Associates.

“I have never encountered that kind of questioning in a pre-employment background investigation in the private sector,” he said, referring to the questions related to sexual or medical history.

After the Journal article published, Gates Ventures CEO Larry Cohen emailed employees on Thursday about a “security screening process that has been conducted with candidates for some specific roles over the years” and reiterated that Gates Ventures was unaware of such questions, according to an email reviewed by the Journal. Cohen said if employees had questions or concerns they should reach out to him or a human resources executive, according to the email.

FT : AI boom forces tech companies to make M&A choice

AI boom forces tech companies to make M&A choice
Groups have to decide whether to build, partner or buy to take advantage of the innovations

Buy, partner or build? That’s the perennial question when an important new technology comes along — and it’s the question just about every company in the tech industry is grappling with when it comes to generative artificial intelligence.

This week, the focus has swung to acquisition. Databricks, a private company that stores and manages large volumes of data for its customers, paid $1.3bn for generative AI start-up MosaicML. Along with developing open-source versions of the kind of large-language models made famous by OpenAI, Mosaic supplies the tools for companies to put the technology to work inside their own businesses, building and refining models using in-house data.

This week also brought news that Thomson Reuters is paying $650mn for Casetext, a 10-year-old AI company specialising in legal services that branched out into generative AI this year. This has shone a spotlight on the sudden importance of knowing how to use the large-language models that power generative AI.

Any company can tap into OpenAI’s underlying models, but Casetext got a jump on the opposition by forging a relationship with the AI start-up early in the development of its latest system, GPT-4. According to Thomson Reuters executives, learning how to steer GPT-4 to solve problems of particular value to lawyers, and knowing the best prompts to get good results from the system, were enough to justify an acquisition.

This spate of acquisitions also shows how quickly the opportunities in generative AI are expanding. In the months after last year’s launch of ChatGPT, the focus was on the companies building large-language models. Led by OpenAI, these included names such as Anthropic, Cohere and Inflection AI (which has just announced its latest, $1.3bn funding round.)

Attention is now shifting to the full range of technologies — and the skills needed to make use of them. With these acquisitions, the value of any company able to create purpose-built models on demand or apply large-scale generative models to specific industries has just skyrocketed.

Yet while a turn to acquisition highlights the centrality that many tech companies believe this technology will soon play in their products, the main focus for most has been on partnerships, anchored in some cases by an equity investment.

Earlier this month, Salesforce doubled the amount of money it has earmarked for investment in AI start-ups to $500mn, as it laid out ambitious plans to build generative AI into many of its products. The news came hot on the heels of its participation in a $450mn investment in Anthropic.

Likewise, Oracle took part in a $270mn investment round in large-model company Cohere earlier this month. Oracle followed up with the declaration that it was partnering closely with the start-up to embed the technology in other services for its own customers.

The use of partnerships sealed by equity stakes looks like a logical first step. They bring immediate access to an important technology. While the industry’s big rivalries have always attracted the most attention, the tech world has long turned on close partnerships like these to deploy important new technologies.

But if large-language models become as central to the future of tech as many in the industry believe, will the biggest tech companies be content to outsource their development?

That question is of particular significance for Microsoft. Its investment of more than $10bn for a large minority stake in OpenAI overshadows the spate of acquisitions and other investments over the past few weeks.

Speaking to the Financial Times earlier this year, Microsoft chief executive Satya Nadella described the relationship as a form of “codependence”, with OpenAI relying on Microsoft as much as the other way around. The AI company needs the supercomputer Microsoft has built and tuned to train its models, he said.

Whether that is a formula for long-term stability in a critical technology partnership, as Nadella claims, is another question. It leaves Microsoft dependent on another company for a core technology. There is no guarantee OpenAI will feel the need to tie itself to Microsoft’s Azure cloud beyond the period of the company’s initial agreement. Nor is it clear yet exactly how OpenAI’s own ambitions will develop, and how much of a direct competitor to Microsoft it may one day become.

But as the tech industry sprints off after an alluring new market, such considerations are easy to put off till another day.

FT : Silver Lake’s Egon Durban says firm focused on ‘all-in bets’

Silver Lake’s Egon Durban says firm focused on ‘all-in bets’
Tech-focused buyout group to make ‘handful or two of large, really important investments a year’

Silver Lake is concentrating its investments on “big all-in bets” as one of Wall Street’s most closely followed investors raises the ambition of its dealmaking operations amid expectations that more volatile markets will unearth large opportunities.

Egon Durban, co-chief executive, said the $98bn-in-assets technology-focused private equity group had decided to focus on fewer but larger investments such as its $12.5bn takeover of software company Qualtrics that closed on Wednesday morning.

“If you see us invest right now, by definition it will be a big all-in bet,” Durban told the Financial Times in a rare media interview. “You’re going to see us do . . . a handful or two of large, really important investments a year and that’s it.”

Durban’s comments contrast to many of Silver Lake’s main private equity rivals who are focusing on smaller deals after rising interest rates have led to a sharp slowdown in deal activity. But he said the tightening financial conditions had presented opportunities to back tech companies that were previously out of reach for private equity buyers.

“Our greatest successes as an institution have been when we are big in terms of capital and in firm resources committed,” he said.

Silver Lake’s €2.4bn move to take over Software AG, one of the largest technology companies in Europe, progressed this month after a rival bidder withdrew their effort.

Silver Lake first invested more than $500mn in Qualtrics, which invented specialised software analytics tools that help companies respond to online customers, during the tech group’s 2021 initial public offering. Qualtrics shares soared to give the company a near $30bn valuation in the months after the listing but fell by about two-thirds last year.

That gave the buyout group the opportunity to assemble a takeover having already held a large public shareholding and representation on Qualtrics’ board. Durban had also grown close to Qualtrics founder and chair Ryan Smith and its chief executive Zig Serafin, who will continue to run the company.

Silver Lake in March agreed to pay $18.15 a share for Qualtrics, valuing it at $12.5bn, or about 40 per cent below its IPO price. The deal was finalised as markets unravelled during the failure of Silicon Valley Bank and as other potential bidders bowed out. Silver Lake arranged a large equity cheque to get the takeover done without requiring heavy debt financing.

Silver Lake and its investors committed about $9bn in cash to fund the buyout. CPP Investments, Canada’s largest pension fund, invested a further $1.75bn, while just $1.2bn of the purchase price was financed with debt. The lack of leverage has made Qualtrics the single largest investment in Silver Lake’s near quarter-century history.

Silver Lake said on Wednesday it had also raised $500mn for the Qualtrics deal from venture group Accel and $250mn from BDT & MSD Partners, the private capital group co-founded by former Goldman Sachs banker Byron Trott and computer billionaire Michael Dell, who himself is investing $250mn.

Ryan Sweeney, a partner at Accel, which backed Qualtrics as a start-up, called the deal “as close to a no-brainer as can be”. 

“It is unusual for us to invest alongside another firm but we have a special relationship with Silver Lake,” said Gregg Lemkau, co-chief executive of BDT & MSD, which manages more than $50bn in assets for founders and family business owners.

Durban helped BDT & MSD co-founder Michael Dell privatise his eponymous personal computer company in 2013 in a hotly contested deal. The wildly successful buyout burnished Silver Lake and Durban’s reputation for working with founders to transform their businesses.

“Qualtrics was sitting in plain sight,” said Durban. The tech company’s majority owner, German software group SAP, announced plans to divest its investment earlier this year, spurring heavy private equity interest.

Smith will make a large investment in Qualtrics and is expected to take an active role in expanding the business through acquisitions and heavy investment in new technologies.

“At our size, these platforms don’t come up with the ability to be taken private very often, or almost ever,” he said. Characterising the deal’s lack of leverage as appealing, he added: “We won’t have to work the first 15 days of the month to make our next interest payment.” 

FT : Police raid more than 20 offices and premises in Adler Real Estate probe

Police raid more than 20 offices and premises in Adler Real Estate probe
Simultaneous raids conducted in Germany, Austria, the Netherlands, Monaco, Portugal, Luxemburg and UK

Police raided more than 20 offices and premises on Wednesday as part of a sprawling investigation into suspected false accounting, market manipulation and breach of trust at controversial German property group Adler Real Estate.

Simultaneous raids in Germany, Austria, the Netherlands, Monaco, Portugal, Luxemburg and the UK involved 21 offices, one law firm and other properties including those of Cevdet Caner, an Austrian property magnate who lives in Monaco.

In Germany alone, 175 prosecutors and officers of the country’s federal criminal police BKA took part, prosecutors said in a press release. Although the release did not name Adler Real Estate or Caner, both confirmed the raids to the Financial Times.

The drastic move by law enforcement authorities marks a major escalation into an accounting scandal at the Berlin-based and Frankfurt-listed real estate group.

Shares of Adler Group, the real estate company’s Luxembourg-based holding company, have nearly been wiped over the past two years, trading at €0.43 on Wednesday. The holding company had lost €2.9bn in market capitalisation in that period.

Adler Group has been unravelling since short selling group Viceroy Research in 2021 accused the company of widespread fraud and inappropriate transactions connected to Caner and Luxembourg-based investment firm Aggregate, one of the company’s investors.

German financial watchdog BaFin last year found that Adler Real Estate, which owns more than 26,000 residential units in Germany, inflated its balance sheet by €3.9bn and its earnings by €543mn in 2019 and filed a criminal complaint against the company.

Earlier this year, the London High Court approved a contentious restructuring plan for €3.2bn in bonds that saved the Adler Group from imminent insolvency.

Frankfurt prosecutors are targeting several individuals aged between 38 and 66 over suspected criminal acts between 2018 and 2020, they said in their press release.

Most suspects are former senior managers of Adler Real Estate, people familiar with the investigation told the FT. Adler Group said in a press statement that the investigations were not directed against any board members of Adler Group.

Ben Irle, Caner’s Berlin-based lawyer, confirmed that his client’s premises in Monaco and London were raided.

Caner told the FT he was “happy” about the formal investigation because he was finally “aware what the accusations are”, adding that he was “absolutely relaxed and I am fully co-operating”.

Hinting at a former court case over alleged fraud and money laundering in Austria, in which he was acquitted, he stressed that he was “previously wrongly accused and won all cases”.

Adler Group said: “The investigations are taking place against the background of business transactions . . . in 2019, which extend into 2020.”

It added that it was fully co-operating with law enforcement authorities but declined to comment further. Aggregate did not immediately respond to a request for comment.

One of the transactions that has come into the prosecutors’ crosshairs is the sale of a property project in Düsseldorf in 2019, known as the Gerresheim deal, people briefed on the matter told the FT.

According to BaFin, it was booked at roughly double its fair valuation, inflating Adler Real Estate’s accounts by up to €233mn. The counterpart in the transaction was one of Caner’s close relatives.

Adler Real Estate is rejecting the BaFin criticism over the Gerresheim transaction and other issues, the watchdog said. The company is taking legal steps against the regulator’s finding.

Besides suspected accounting and market manipulation, prosecutors also take issue with other property sales as well as the Gerresheim deal, which they fear have inflated prices and improved loan-to-value ratios.

A forensic audit by KPMG launched after the Viceroy allegations also found that Caner was paid €12.6mn for undocumented “advisory services” in two M&A transactions, while Adler Real Estate also bought some of Aggregate’s bonds in an undisclosed transaction.

FT : EU rejects US offer to end steel tariff dispute

EU rejects US offer to end steel tariff dispute
Brussels and Washington need to find solution by October to avert trade war

The EU has rejected a proposed US solution to end tariffs on steel and aluminium, heightening fears of a renewed transatlantic trade dispute.

The two sides paused a tariff war over measures imposed by then US president Donald Trump in 2021 but must find a binding deal on a new “green steel” club by October.

But the EU believes the US’s proposed solution is likely to breach World Trade Organization rules because it discriminates in favour of domestic producers, according to officials with knowledge of the situation. 

Valdis Dombrovskis, the EU trade chief, is travelling to Washington next week as time runs short to secure a breakthrough

If the two sides cannot reach an agreement, the US tariffs will kick back in automatically in October — and so will EU retaliatory measures. The tariffs are 25 per cent on steel and 10 per cent on aluminium from Europe while EU measures target products such as bourbon whiskey and Harley-Davidson motorcycles. 

When they paused the dispute the US and EU agreed to form a sustainable steel club that would prioritise low carbon production — a measure also aimed at lowering both sides’ reliance on Chinese imports.

The US proposal would allow club members to set emissions standards, and levy tariffs on those who do not meet them, according to media reports. To join, governments would also have to commit to not overproduce steel and aluminium and to limit the role of state-owned enterprises.

Brussels instead thinks its new carbon border adjustment mechanism (CBAM), which will levy tariffs on imports according to their carbon intensity, is the right answer.

It has suggested CBAM combined with traditional trade defence tools — to address overproduction in the sector — as the basis for the so-called Global Arrangement on Sustainable Steel and Aluminium (GSA). 

Unlike the EU, the US has no national carbon pricing system and the Biden administration is wary of levying charges on heavy industry in states the president needs to retain in the 2024 election such as Pennsylvania, Michigan and Illinois. 

It is also reluctant to drop the tariffs, which Trump imposed on national security grounds, and be accused of risking blue-collar jobs, especially because of cheap Chinese imports.

The EU has an emissions trading system that forces companies to buy permits to pollute, with the price of a tonne of carbon hitting €90 in recent months. Its CBAM would force importers to pay the same price for seven sectors, including steel and aluminium. if the country of origin has a lower, or no, carbon price.

The truce put in place a temporary system of tariff-rate quotas, which allow exports of metals between the EU and the US with lower levies up to a certain volume.

In return, the EU suspended retaliatory tariffs and the two sides agreed to set up the global arrangement by October this year when the deal expires. 

The hope is to sign a deal at a possible EU-US summit around that time.

Dombrovskis will also push for better treatment for the EU under the US’s support scheme for electric vehicles. Washington’s Inflation Reduction Act restricts subsidies to EVs and batteries substantially made in the US, Canada and Mexico.

But it has offered to include EU manufacturers sourcing or processing the five most common minerals for batteries. However, some EU governments are pushing to expand the regime to all 50 metals listed in the IRA. “We don’t know how battery technology will evolve,” said one EU official.

European Commission spokesperson Miriam Garcia Ferrer confirmed Dombrovskis’ travel plans and said contacts with the US were “continuous”.

She said the two sides were “fully committed to achieving an ambitious outcome” for the GSA by October.

The EU wanted a “permanent solution” and “to re-establish normal and undistorted transatlantic trade in the sector”.

“All this would be done in compliance with our international obligations, such as WTO rules, as well as our domestic climate policies,” she added.

The US administration did not immediately respond to a request for comment.

Time : Why the World Is on the Brink of Great Disorder (Ray Dalio)

Time : Why the World Is on the Brink of Great Disorder (Ray Dalio)


I’m a global macro investor who has been betting on what’s going to happen for over 50 years. I’ve been through all sorts of events and cycles in all sorts of places over a long time which led me to study how these events and cycles work. In the process, I learned that I needed to study history to understand what’s going on and what’s likely to happen.

Early in my career, I learned though a couple of painful mistakes that the biggest things that surprised me did so because they never happened in my lifetime but had happened many times in history. The first time that happened was on August 15, 1971 when I was clerking on the floor of the New York Stock exchange and the U.S. defaulted on its debt promise to allow people to turn in their paper dollars for gold. I thought that this was a big crisis that would send stock prices down but they went up a lot. I didn’t understand why because I’d never experienced a big currency devaluation before. When I looked back in history, I saw that the exact same thing happened on March 5, 1933 when Roosevelt defaulted on the U.S.’s promise to let people turn in their paper money for gold and stocks went up. That led me to study and learn why—which is that money could be created, and when it’s created, it goes down in value which makes things go up in price. That experience led me to study the rises and declines of markets, economies, and countries which I’ve done ever since. For example, my studying how the 1920s debt bubble turned into the 1929-33 financial collapse led me to anticipate and profit from the 2008 financial crisis. That’s how I learned that it’s critical to take a longer-term perspective and understand the mechanics behind why history rhymes.

A few years ago, I saw three big things happening that hadn’t happened in my lifetime but had happened in the 1930-45 period. These were:
  1. The largest amounts of debt, the fastest rates of debt growth, and the greatest amounts of central bank printing of money and buying debt since 1930-45.
  2. The biggest gaps in wealth, income, values, and the greatest amounts of populism since the 1930-45 period.
  3. The greatest international great powers conflict, most importantly between the U.S. and China, since 1930-45.
Seeing these three big things that never happened in these magnitudes in my lifetime led me to study the rises and declines of markets, economies, and countries over the last 500 years, as well as the rises and declines of China’s dynasties the last 2,100 years.

That examination showed me that these three big forces—i.e. the debt/money one, the internal conflict one, and the external conflict one—transpired in big cycles that reinforced each other to make up what I call the Big Cycle. These cycles were driven by logical cause-effect relationships Most importantly, this study of the last 500 years of history taught me that:

  1. The previously described financial conditions repeatedly proved to be leading indicators of big financial crises that led to big shifts in the financial order.
  2. The previously described levels of political and social gaps repeatedly proved to be leading indicators of great conflicts within countries that led to big changes in domestic orders.
  3. The previously described great powers’ conflicts repeatedly proved to be leading indicators of international conflicts that led to big changes in the world order.
Said differently, history shows that the painful seismic shifts part of the Big Cycle comes about when there is simultaneously 1) too much debt creation that leads to debt bubbles bursting and economic contractions which cause central banks to print a lot of money and buy debt, 2) big conflicts within countries due to big wealth and values conflicts made worse by the bad economic conditions, and 3) big international conflicts due to rising world powers challenging the existing world powers at a time of economic and internal political crises In doing this study, I also saw two other big forces that had big effects. They are:
  1. Acts of nature (droughts, floods, pandemics) including climate change.
  2. Learning leading to inventions of technologies that typically produced evolutionary advances in productivity and living standards —e.g., the First and Second Industrial Revolution, and computing/AI revolution.

I call these the Five Big Forces. I saw how they affect each other and change in logical ways to produce the Big Cycle that produces big changes in the world order. I came to realize that if one understands and follows each of these forces and how they interact, one can understand most everything that’s changing the world order. That’s what I’m trying to do.
I will give you a quick summary of what I learned from my study but if you want to lean more about how and why things change you can get that in my book Principles for Dealing with the Changing World Order.
Where We Are and What’s Likely Ahead
1. The Financial/Economic Force
In the U.S., we are now in middle part of what I call the short-term debt cycle and is also known as the business cycle. These short-term debt cycles have lasted 7 years on average, give or take about 3 years. There have been 12 1/2 of them since the new monetary world order started in 1945. So, we are now about half-way though the 13th of the cycles, at the point of the cycle when the central bank has tightened money to fight inflation that is just before the debt and economic contractions which will likely come over next 18 months.
We are also in a late and dangerous part of the long-term debt cycle because the levels of debt assets and debt liabilities have become so high that it is difficult to give lender-creditors a high enough interest rate relative to inflation that is adequate to make them want to hold this debt as an asset without making interest rates so high that it unacceptably hurts the borrower-debtor. Because of unsustainable debt growth, we are likely approaching a major inflection point that will change the financial order. Said differently, it appears to me likely that we are approaching a debt/financial/economic restructuring that will lead to big changes to the financial order.
More specifically. it appears likely to me that because of large deficits the U.S. Treasury will have to sell a lot of debt and it appears there will not be adequate demand for it. If that happens, it will lead to either much higher interest rates or the Fed printing a lot of money and buying bonds which will devalue money. For these reasons, the debt/financial conditions could worsen, perhaps very significantly, over the next 18 months.
2. The Domestic Order Force
In several countries, most importantly the U.S., we have seen a growing percentage of the population that are populist extremists (about 20-25 percent of the right are extreme and about 10-15 percent of the left are) and a shrinking of the percentage of the population that are bipartisan moderates. Though the bipartisan moderates still remain in the majority, they constitute a declining percentage of the population and they are far less willing to fight and win at all costs. In studying history, I saw this growing populism of both sides and increased conflict has repeatedly occurred when large gaps in wealth and values existed at the same time as bad economic conditions. At such times, significant percentages of the population chose populist political leaders who vowed to fight and win for them rather than compromise. In my book, I described the state the U.S. is now in as Stage 5 (“When There Are Bad Financial Conditions and Intense Conflict”) of the “internal order cycle,” which comes just before some sort of civil war and changes in the domestic order. That is what is now happening.

Looking ahead, the next 18 months will be an increasingly intense big election period which will lead to much greater political conflict which is likely to sharper the divide between the lift and the right. Thirty-three Senate seats, the presidency, and control of the House will be fought over by a number of populist candidates and there will likely be poor economic conditions, so the fights will be vicious and there will be a real test of rule-following and compromising, both of which are required to make democracies work. You can see the movement toward a win at all cost fight while the respect for the legal and political systems declines. You can see this dynamic playing out even now, in things like Donald Trump and his followers being at war with the justice system, or as he and his followers would say, the system’s war against him. Whichever perspective you have, it is clear that we are headed into a type of civil war over the next 18 months. To me the most important war is between the bipartisan moderates and the populist extremes, yet the bipartisan moderates are for the most part quietly staying out of this fight. The only thing the Democrats and Republicans can agree on, which most Americans also agree on, is being anti-China which brings me to my next big force.
3. The International World Order Force
The conflicts between the U.S. and China are likely to intensify as domestic political tensions will likely lead to increased aggressiveness toward China. That is because in the U.S. most everyone is anti-China and those running for office will want to out-China-bash each other in an election year. China and the US are already dangerously close to some form of war, whether an all-out economic one or, worse, a military one. There are also important elections in Taiwan next year, which is already a flash point in U.S.-China elections, and a U.S.-backed push for Taiwanese independence is something to keep a close eye on when weighing the potential for even more overt U.S.-China conflict. There are several issues—Taiwan, chips, dealing with Russia, sanctioning investments—that are being fought over, and both sides are preparing for war. I don’t mean to say that we are destined for war, but I do mean that the odds of some form of a major conflict are dangerously high.
4. Acts of Nature
Acts of nature are of course harder to predict accurately, but they appear to be getting worse and are likely to be more costly and damaging over the next five to ten years due to climate change. Also, the world is entering an El Niño phase of the climate cycle over the next year.
5. Technology
What can we expect from technology/human inventiveness? Like acts of nature, it is hard to know exactly, though there should be no doubt that generative AI and other technological advances have the potential to cause both massive productivity gains and massive destructions, depending on how they are used. The one thing that we can be sure of is that these changes will be greatly disruptive.
Exactly how events will unfold is beyond my ability to say, but there is no doubt in my mind that those who assume that things will work in the orderly ways we have gotten used in the last few decades will be shocked and probably hurt by the changes to come.

How well these changes are managed will make all the difference. If our leaders can rise above their tendencies to fight and instead focus on cooperating, we can certainly navigate these tricky times to create a better world for most people. Presumably, this outcome is best for everyone, so we should be strongly against civil disorder and war between nations, keeping it in the back of our mind so we strive for cooperative decision-making. For example, now that a debt ceiling agreement has passed, it would be great to see the Democrats and Republicans mutually agree on a bipartisan group of very skilled people to come up with a practical, long-term bipartisan plan. I wrote an article “Why and How Capitalism Needs to be Reformed?” years ago which is still relevant today in case you’re interested. Having said that, it is probably unrealistic to believe that we can materially change the course of events, so what is most important for most people is to visualize the worst and be prepared it. If you do that, you will be prepared for it and will probably be fine.
In closing I should say that the most important thing I’ve learned in my 50 years of being a global macro investor is that I can be wrong. For that reason, while I suggest that you consider what I am sharing, I also suggest that you assess it and the circumstances for yourself.

>>> US Research Calls

Research Calls

  • Upgrades:
    • Beazer Homes (BZH) upgraded to Outperform from Neutral at Wedbush; tgt $31
    • BHP Group (BHP) upgraded to Neutral from Underperform at Exane BNP Paribas
    • Boise Cascade (BCC) upgraded to Buy from Hold at Truist; tgt raised to $100
    • California Water (CWT) upgraded to Equal Weight from Underweight at Wells Fargo; tgt lowered to $56
    • Community Bank (CBU) upgraded to Outperform from Market Perform at Hovde Group
    • Lincoln Electric (LECO) upgraded to Overweight from Sector Weight at KeyBanc Capital Markets; tgt $232
    • Louisiana-Pacific (LPX) upgraded to Buy from Hold at Truist; tgt raised to $82
    • NNN REIT (NNN) upgraded to Buy from Neutral at Janney; tgt $48
    • Pinterest (PINS) upgraded to Overweight from Equal Weight at Wells Fargo; tgt raised to $34
    • Vodafone PLC (VOD) upgraded to Neutral from Underperform at Exane BNP Paribas
  • Downgrades:
    • Advanced Drainage Systems (WMS) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt raised to $114
    • American States Water (AWR) downgraded to Underweight from Equal Weight at Wells Fargo; tgt lowered to $89
    • American Equity Investment Life (AEL) downgraded to Mkt Perform from Strong Buy at Raymond James
    • Delek Logistics Partners (DKL) downgraded to Sell from Neutral at Citigroup; tgt $47
    • Melco Resorts & Entertainment (MLCO) downgraded to Neutral from Buy at BofA Securities
    • Regeneron Pharma (REGN) downgraded to Hold from Buy at Canaccord Genuity; tgt lowered to $720
    • Vale S.A. (VALE) downgraded to Sector Perform from Sector Outperform at Scotiabank; tgt $16
    • Vale S.A. (VALE) downgraded to Underperform from Neutral at Exane BNP Paribas; tgt $13.20
    • Veeva Systems (VEEV) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt $181
    • Uber (UBER) downgraded to Outperform from Buy at Daiwa Securities; tgt raised to $51
    • Walgreens Boots Alliance (WBA) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $34
  • Others:
    • Arteris (AIP) initiated with a Buy at WestPark Capital; tgt $18
    • Bristol-Myers (BMY) initiated with an Outperform at Daiwa Securities; tgt $70
    • Cboe Global Markets (CBOE) initiated with an Equal Weight at Barclays; tgt $146
    • CME Group (CME) initiated with an Overweight at Barclays; tgt $215
    • Coeur Mining (CDE) initiated with an Outperform at National Bank Financial; tgt $4.25
    • Corteva (CTVA) initiated with a Buy at Canaccord Genuity; tgt $75
    • Deere (DE) initiated with a Buy at Canaccord Genuity; tgt $530
    • Donaldson (DCI) initiated with a Neutral at Citigroup; tgt $66
    • Extreme Networks (EXTR) initiated with an Outperform at Oppenheimer; tgt $35
    • First Horizon (FHN) resumed with a Neutral at Goldman; tgt $13
    • Hammerhead Energy (HHRS) initiated with a Buy at Stifel
    • Hecla Mining (HL) initiated with an Outperform at National Bank Financial; tgt $7.50
    • Intercontinental Exchange (ICE) initiated with an Equal Weight at Barclays; tgt $123
    • MarketAxess (MKTX) initiated with an Overweight at Barclays; tgt $310
    • Paycom Software (PAYC) initiated with an Outperform at William Blair
    • Paycor (PYCR) initiated with a Neutral at Mizuho; tgt $24
    • Rexford Industrial Realty (REXR) initiated with a Neutral at Mizuho; tgt $52
    • Snowflake (SNOW) resumed with an Outperform at William Blair
    • SoundThinking (SSTI) initiated with an Overweight at Cantor Fitzgerald; tgt $31
    • Stagwell (STGW) initiated with an Equal-Weight at Morgan Stanley; tgt $9
    • Tradeweb Markets (TW) initiated with an Overweight at Barclays; tgt $89
    • Western Alliance Bancorp (WAL) initiated with a Hold at Deutsche Bank; tgt $41
    • Workday (WDAY) initiated with an Outperform at RBC Capital Mkts; tgt $275