Siddhartha Ahluwalia

Hi, this is Siddhartha Ahluwalia. Welcome to The Neon Show. I’m your host and also co-founder of Neon Fund, one of the most enterprising funds in B2B SaaS space, investing in enterprising SaaS companies built out of India for the globe.

And today I have with me Matein Khalid. I’ll call him Matt. Matein, I love your writings on LinkedIn.

I’m fascinated by it and once I scroll on your LinkedIn, I can’t stop reading till my mind gets tired, right? And for the audience, I’ll introduce you. You have been a board advisor on global financial markets to Royal Corporate and family offices across UAE and Saudi Arabia, right?

And you have such a rich track record, you know, in being a financial advisor to the biggest of the institutions in this region and previously in the US and New York, right? So I would like to dive in straight into your views. First of all, thank you so much for coming on the podcast.

Matein Khalid

Oh, thank you for having me. It’s such a pleasure, Sid, to be with you, you know, and at a very sort of a unique, I would say, action point in world economic history, right? I mean, sort of so much could happen next year.

Siddhartha Ahluwalia

And when did you start independently trading?

Matein Khalid

I, that’s another story. I, as a teenager, I started sitting in the office of one of my father’s friends, who was one of the leading businessmen of Dubai at that time, and I started trading on his behalf, my dad’s behalf. I started, I was underage, I could not open an account of my own at 18.

So I started trading the commodities markets, silver, gold.

Siddhartha Ahluwalia

So you have been trading for the last 44 years?

Matein Khalid

Yeah, in one form or the other, yes. Yeah. Intermittently too, because any plans I had to, any plans I had to, you know, oh, mummy, who needs to go to school here?

Why can’t I go trade full time? No, no, no, no, no, no, you’re going to go to college. So yeah, so that was the one thing they were insistent on.

Siddhartha Ahluwalia

Current avatar of managing your own money versus managing?

Matein Khalid

Yeah, yeah. So we manage, yeah, I manage basically my own family. And then I have certain friends who I also manage their money for them. And then we do deals also.

Siddhartha Ahluwalia

Yeah. And how long has been the current avatar of managing your own money and families?

Matein Khalid

Oh, that’s been going on for more than a decade. Actually, more than a decade. Yeah.

Yeah. Way more than a decade. Yeah, I would say.

Yes. But I’ve always been managing my own assets. I’ve always managed them in the markets, mainly the equity markets.

I mean, I don’t do as much foreign exchanges as I used to, because that’s stressful as hell. But even if you manage a global equities portfolio, you know, you have to take a view on you have to take a view on currencies.

Siddhartha Ahluwalia

I want to ask you, you have written consistently recently about Trump. What Trump’s means geopolitically and economically for the world in 2025?

Matein Khalid

Yeah, well, you know, I think if there is one thing that would define Trump 2.0, because as you know, he’s had a one term before. It is his sheer unpredictability. Because, you see, last time around, he did not come with hundreds, you see the technocracy, the posts at, let’s say, State Department or his first, his first Secretary of State, first time around, was Rex Tillerson, the CEO of Chairman and CEO of Exxon.

The guy lasted one year. He had, I think, three national security advisors. The first guy lasted 17 days before he was forced out as a result of a scandal.

And then the other two were generals, right? So in a way, those guardrails are no longer there. So he is basically filled it up with loyalists.

And I feel that is going to have profound impact on world politics. It already, you can already see the contours of that. So for example, for India, especially, right?

Because I mean, I would think the bulk of the audience who is looking at us from an Indian point of view, right? The head of the CIA, John Ratcliffe, Trump loyalist, right? He was head of national intelligence for two years, very right wing congressman from Texas.

Marco Rubio, vice presidential candidate, former Florida Senator, Secretary of State. Mike Waltz, actually a very competent guy, is the national security advisor. Three top national security posts in the Trump administration.

And Pete Hegseth, Defense Secretary, right? A guy who’s going to be, you know, managing probably the biggest bureaucracy in the world, three million people, the Defense Department. Former Fox News host, who I think rose above, never rose over the rank of captain.

Of course, Adolf Hitler never rose above the rank of corporal in the German army. But then look at the performance of the, you know, when he took command. I mean, he just destroyed it.

Anyways, I don’t want to compare him with Hitler. But just the very fact that there’s all these four men are China hawks to the core.

Siddhartha Ahluwalia

And what do you mean by China hawks?

Matein Khalid

China hawks means they are convinced that the United States and China are now in a Cold War situation. They are convinced that it’s a zero-sum game, that China is a national security threat to the US given the scale of the armaments of the People’s Liberation Army. There is some truth to that, right?

It cannot be denied completely. It’s not a figment of, as they say, sometimes even paranoid people have real enemies. So now, I think this is bullish for India without having to do anything, because in a sense, this basically means that issues like trade or, you know, HB-1 visas in the wider scheme of things, when you’re talking about an existential conflict now between America and China, this could be, you know, the, let’s say, the quad.

America and India already in, and this is, as you know, over the last 20 years, US-Indian relations have really gone from strength to strength on a variety of issues, right? For a variety of fronts. I mean, how many people know that 40% of the prescription medicines prescribed in America taken by Americans emanate from India?

And in some categories for generic medicines, the figure is as high as 90%. So, in a way, what you’re seeing, Sid, is, I think, an opportunity for India to have a privileged relationship with the US based upon both economics and security. And security, and that would probably mean a bit of a tilt, a bit of a tilt.

So, okay, I think publicly, Mr Jai Shankar has done a superb job of articulating that, hey, listen, my job as the Foreign Minister of India is to buy the cheapest oil I can find in the world, and if it happens to be Russian, so be it, not to mention uranium. If I need to get my ingredients for the medicines I’m selling to America from China, then okay, all right, we have trade, we can do trade, you know. So, and have fantastic relations with the US because there’s such a, you know, again, there’s such a financial, human, cultural soft power link with the US, right? I don’t need to elaborate that to you of all people.

So, I would think that India becomes a privileged partner in this new Trump world, where I don’t think the full range of punitive trials, because India is a protectionist economy, you know that, I know that, right? Infant industries don’t shed their diapers, right?

But this could, yeah, there are certain fronts. I mean, Elon Musk wants Starlink, you know, basically a license for Starlink to be beamed into, a broadband satellite to be beamed into India, and that puts him in direct competition with…

Siddhartha Ahluwalia

With Jio.

Matein Khalid

With Jio and with Sunil Bharti Mittal, right? Who are both dead set against it. So, the government will have to make choices.

If you give me a sort of, if I was a betting man, I’d bet that they will probably tilt towards Elon, right? So, again, the arrival of Trump right now, I mean, there’s certain basic things one can see. For example, just yesterday, the stock of US Steel, a company that was basically Nippon Steel had made an offer for US Steel.

You know, basically from Nippon Steel’s point of view, okay, their idea was that many of our car makers, the biggest Japanese car makers have set up plants in the US for the last 40 years. So, it makes sense for us to have steel production in the US too. But obviously, what they did not realize that Pennsylvania was a swing state.

And there was no way either Trump or Kamala Harris was going to take any chances with pissing off the unions in Pennsylvania. You know, they needed them on their side. So, they were both against this takeover, yeah.

Now, the idea was people got a little complacent, and they thought the ARBs piled into the stock thinking that the merger will proceed ahead, because obviously, Trump wants to do deregulation, right. So, a lot of ARBs started building up positions in the stock. I myself was recommending it in the 30s, early 30s.

And then yesterday, Trump puts out a tweet saying, there’s no way I’m going to allow this. You know, it’s an American asset, US Steel, Andrew Carnegie, Bethlehem, Pennsylvania. You know, it’s as if a foreign company were to buy Jamshed Tata’s first steel mill in, where was it, somewhere in the east, right? In Chhattisgarh, was it?

Siddhartha Ahluwalia

In Jamshedpur.

Matein Khalid

In Jamshedpur, exactly. So, would that be, you know, so there’s a, so my thinking is that, look, we don’t know, is he going to do tariffs? Yes.

But what will be the scale of these tariffs? How long will they last?

Siddhartha Ahluwalia

60% tariff on all the Chinese goods, and 10% tariff on European goods, Indian goods, whatever it is.

Matein Khalid

I think that probably will happen. What will be its inflationary impact? What will be the duration of these tariffs?

On what goods will these tariffs be put? Or will it just be blanket? Remember a campaign, you know, as they say, you campaign in poetry and govern in prose.

We already are at a very fragile moment in both China and Europe, for instance, right? So, I don’t know.

Siddhartha Ahluwalia

Why is China fragile?

Matein Khalid

China is fragile from an economic point of view, Oh Sid, they’re in a terrible, terrible shape. I mean, their growth rate, the Chinese growth rates, which used to be, you know, close to 10% have now come down to, I don’t think they can barely manage 4% to 5% this year. Their youth unemployment is so high that it’s considered a state secret.

They’ve got 100 million graduates of universities over the last decades, many of whom are finding it difficult to get jobs. You’re going to see them losing many, many more jobs as, you know, they were basically the factory of the world. Well, Trump’s threats of tariffs are now going to force a supply chain.

I mean, it’s going to be a supply chain disruption that could echo what we saw in 2020 because of the pandemic, right? It could. That process is already beginning to happen, right?

Where businesses are actually moving out to Mexico or to Vietnam or to India, China plus one, right? So, that process is happening in Indonesia and the Philippines too. So, in many ways, the Chinese economy, confidence, consumer confidence, business confidence, all-time lows.

Now, the real danger I see, and there again, India could be affected at a time when India cannot really afford it, is what if the Chinese use the yuan exchange rate as a beggar-thy-neighbor devaluation, right? Which to a certain extent is also happening. And that is, I think, one of the reasons why the RBI allowed the rupee to depreciate below 84.

You know, the rupee went down to 84.5. I think that’s where we are now. In fact, I’d written a piece on it too because I thought at 84, the rupee, you know, the RBI, India’s foreign exchange reserves, $700 billion. So, it’s not as if it was a bunch of hedge funds ganging up on India against the rupee.

None of that. None of that. The rupee goes where the RBI wants it to go, right?

And clearly, it was to a certain extent, king dollar, you know, the dollar post-election, actually pre-election. Pre-election, as soon as, there’s a correlation between the dollar taking off higher and Trump’s, the poll numbers predicting a Trump win. And then, of course, it happened and the dollar still went up about 4-5% after that.

Siddhartha Ahluwalia

I believe it’s because people started buying more dollars with Trump in the center. That’s the reason?

Matein Khalid

Yeah, yeah. You see, the thing was, again, that in many ways from a classic sense, if you look at Trump’s agenda from a big picture point of view, there’s no doubt, Sid, that it’s inflationary. But are we talking about a severe inflation shock?

Or are we talking about a one-shot pop in inflation, and then things will revert back to normal? Even the Fed doesn’t know. The Fed says I’m data-dependent.

Yeah, and he is to a very great extent. The central bank has been following the data. And the data has been disinflationary.

We have reached a soft landing, right? The whole, you know, the metaphor used to be Goldilocks, right? Growth not too strong and inflation not too cold, right? Or maybe the other way around.

Siddhartha Ahluwalia

There was a narrative on recession happening in the US.

Matein Khalid

Well, it didn’t happen at all. The recession did not happen at all. I mean, I think in January 2024, you know, a year ago precisely, had we been told that the S&P would be up 27%, you know, gold would be up 30%, we would say, what the hell are you talking about?

We could see a recession and a collapse in earnings. That did not happen. I think that was more a tribute to the fact that, well, it’s 70%.

The US economy is almost 70% consumer. And the consumer has been, other than the very low end, has been in a pretty robust shape. The reason for that has been, well, quite frankly, absolute, you know, the fiscal injections, the fiscal lollipops, trillion dollar fiscal lollipops given by Biden, when it was very clear that the pandemic was over.

The monetary lollipop that was given by the Federal Reserve. And then, of course, that was taken away later on, when inflation came on. But you, in a sense, and then the inflation, then the inflation.

Rhythm Desai of Morgan Stanley has done an analysis and I was, you know, I’ve just sort of seen his conclusion that Indian households, let’s say 100 million Indian households have got equities. Over the last decade, they have seen a $10 trillion increase in the consumer net worth.

Siddhartha Ahluwalia

In the US?

Matein Khalid

In India. So that process in America is estimated at multiples of that, right? Because it’s a much bigger economy, so to say.

So a secular bull market in, and in America, it’s accompanied by a real estate bull market too, right? In India, the bull market has been somewhat dormant in real estate. Inventories are very low right now.

So I would think that consumer spending has been very strong. Business confidence has been very strong in the US, except at the bottom end. You see that in the performance of, let’s say, Dollar General and some of these, you know, low, these retail companies that target the low end of the population.

Auto insurance costs are very high. Healthcare insurance costs are always very high in America. Education has gone through the roof, you know, and basically service inflation is high and continues to be high in the US.

To a certain extent where America and India have one thing in common, I feel, is that this recovery has become a K-shaped recovery.

Siddhartha Ahluwalia

What is K-shaped recovery?

Matein Khalid

A K-shaped recovery means the rich are getting richer and the poor are getting poorer, to use the old Carlos Santana song, right? That in a sense, take India. Today, if you look at what happened to the price of tomatoes or onions or garlic or, you know, simple bhaji, vegetarian meal, I mean, has literally shot up.

So, in a way, we are, in India, at the higher end of the RBI’s 2% to 6% tolerance range. I think that means, I don’t think the RBI will be in such a cut, such a hurry to cut rates. I don’t think they’ll be in such a hurry to cut rates.

They would need the inflation picture to dampen. Now, again, you can argue that that’s probably because you had very, very severe monsoon this year, which obviously has an inflationary impact on basic commodities. But it’s something to be wary of.

I mean, I can’t forget that it was really an inflation spurt that actually was the final nail in the coffin of the old UPA government and basically allowed Modi to get a landslide and, you know, change the course of Indian history, at least economic history, in 2014. Yeah. So, I think, you know, I remember an old, what was it, the Secretary of Defense, Donald Rumsfeld, who talked about the known unknowns and the unknown unknowns.

So, in Trump’s case, I think the knowns are, is he going to use tariff as an instrument of foreign policy and economic nationalism? Yes, that’s who he is. And that’s the constituency that elected him.

But how severe will that be? I mean, how severe will it be? In the 1930s, the smooth tariffs literally amplified the Great Depression in the world.

I don’t think anything like that could happen. But we are seeing fault lines and fragilities in the world economy that could, look what happens to emerging markets, right? Look what happens to emerging markets.

You have a dollar that’s going up, which means the net present value of dollar debt in the world for poor countries is shooting up. You could see, you already have a chain reaction of dominoes, default dominoes in sub-Saharan Africa, some of the poorest countries in the world. This could really get much worse. This could really get much worse.

Siddhartha Ahluwalia

And where do you think the US debt is going, right? What effect it has on the global economy in the US?

Matein Khalid

Yeah, See Sid, the US debt is actually quite problematic. People are talking about France being bankrupt, France on a collision course with the EU, with Brussels, now not even having a government. And the French GDP, debt to GDP, budget deficit is 6%, roughly, right?

Well, the US is worse than that. The US is $1.8 trillion on, let’s say, a $27, $28 trillion economy. The US is about 6.4%, and soon to rise to as much as $2 trillion next year. And the worst thing about it is that 80% of it is things they cannot really cut, you know, no matter what Elon Musk or anybody else says. You simply cannot cut Medicare, Medicaid, social security, defense spending or things. Well, education, you probably can, but there is some discretion there.

But education is mainly done through the states, right? Most of the states are the ones who are running the education, state universities in America, if you will, or you have private universities, right, which have their own endowments like the Ivy Leagues. So I would tend to think, I mean, even though they’ve come up with this very nice, catchy slogan, which I believe the new Treasury Secretary is a global macro manager called Scott Besant, very interesting guy.

They have come up with this idea of 3-3-3, means we want 3% GDP growth, and they probably can get that, that they’re getting anyway.

Siddhartha Ahluwalia

Real or nominal? Real GDP growth or nominal GDP growth?

Matein Khalid

Yeah, it would be real GDP growth. Yeah, 3% real GDP growth. 3%, they want the deficit to be 3%, which I think is going to be impossible virtually.

In Trump’s administration, I really think that’s going to be impossible. And they want 3 million barrels more in the price of oil, which could have a huge impact on the Middle East, right? So if you were planning on buying real estate in this part of the world, I would hit the pause button on that, before you know how things pan out on a macro thing.

Siddhartha Ahluwalia

Let’s say the year 2025, would it be more prosperous for the people in white collars or blue collars across India and the US? Because that’s what our audience is.

Matein Khalid

Yeah.

Siddhartha Ahluwalia

How do you say that? It will be more prosperous?

Matein Khalid

Yes, I think it would be prosperous because Trump is going to preside over a rollback of regulation, a lot of the regulation. So that’s going to be obviously rolled back. Trump is going to allow mergers, deal making, a lot of that could happen also.

Siddhartha Ahluwalia

The Google antitrust suit, which was about to break Google into two parts.

Matein Khalid

Yeah.

Siddhartha Ahluwalia

It’s not going to happen under Trump’s rule.

Matein Khalid

I don’t think so. I don’t think so. The Justice Department, well, you know, the actually the irony is it was started under Trump, wasn’t it?

Initially, the initial Justice Department thing. I don’t think that Trump is in the business of breaking up the big tech monopolies. All of them are going to Mar-a-Lago to kiss his hand.

I mean, Sundar Pichai is no different, right? So they might have to divest the Chrome browser, you know, because that’s what the Justice Department has. But I think it’s manageable.

I don’t think it’s something that Google has. And in fact, I think that’s an opportunity. I actually bought Google.

I was selling puts on Google all through its rise. And I still think it’s got some way to go. It’s about $175, just as soon as we came into the studio.

About $175, but still trading at, it’s one of the cheaper max sellers. So yeah, so I think in terms of white-collar, we see the disruption to the white-collar industries in the world is not happening from Trump. It’s going to happen from things like AI.

The impact of AI is going to be profound on what, computer programmers, on anybody who is doing jobs that do not require high, you know…

Siddhartha Ahluwalia

High brainpower.

Matein Khalid

High brainpower, or high symbolic, yeah. The ability to manage symbolic these things, right? To which I would say people like us, who are investors, right?

Yeah, yeah, yeah. But even though there are robo-advisors, who can probably do a far better job in the global markets than I can, you know?

Siddhartha Ahluwalia

And do you think the attack on Adani, which was the last, I think, one of the acts of the Biden government, is probably the last act of attack on India?

Matein Khalid

You know, see Sid, I mean, again, maybe that’s… Yeah, the SEC and the Justice Department, so to some extent, obviously, the SEC and the Justice Department do not accuse a very prominent businessman, I mean, let’s face it, he’s no ordinary businessman, right? On such a public forum, to bring a, you know, a criminal indictment, right?

Without having consultations with the White House. So to that extent, did the Biden White House know about it or countenance it? Yes.

Yes, they did. Why did they do it? I really don’t know, because I don’t think it is in America’s national interest to alienate India.

If they had, or if they have proof that, yeah, bribes were paid, and this is a violation of the Foreign Corrupt Practices Act. I can tell you about violations of the Foreign Corrupt Practices Act that happened in the Middle East, in other parts, in South Asia, in Southeast Asia. So, again, this really leads me to believe that they have not really, that the American establishment, or at least one end of the American establishment, has not really accepted India as a security partner.

And that’s probably because, you know, they have a maximalist view of their alliance network. You have to be like Japan. Maybe Mr. Modi should start learning golf, right?

I guess a little too late in the day for that. But, you know, some of the leaders in Asia, like the Japanese Prime Minister, even this President Hun, who probably will no longer get the chance to play golf at Mar-a-Lago, maybe in the prison cell that he has in Seoul, he might play golf, but nowhere else. This guy was actually sort of honing up on his golf game, so he could deal with Trump better.

But it leads me to my contention that maybe India finally has to make up, will finally have to distance itself from America’s professed enemies. You know, that in a sense, in a world that is defined by Washington in binary terms, you can no longer be all things to all people. That maybe it’s best to realize that your economic interest, I mean, you know, five and a half million Indians settled in America.

They are one and a half percent of the GDP, of the population.

Siddhartha Ahluwalia

But 5% of the GDP.

Matein Khalid

5% of the GDP. Some people say it’s even as high as 6%. And certainly in nodal points across America, right?

Take the characters on the political stage of 2024, the wife of the vice president, right? Vivek Ramaswamy, you know, Nikki Haley, Narmada Haley, right? So in a sense, you have the participation on Indians on both sides, on both the Biden-Preet Bharara, right?

So in a way, I think India’s strategic interests in every sense of the term are tilted towards the US.

Siddhartha Ahluwalia

So you mean that India now has to distance itself from Russia and buying oil from Russia?

Matein Khalid

Well, I mean, first of all, I would say India has reached this technological state where there is nothing very much that it is buying from Russia in terms of armaments that it cannot produce itself, right? Or should be producing itself. So that’s one thing.

Secondly, some of the, I mean, you know, some of the Russian hardware has just not worked as efficiently as it could have, right?

Siddhartha Ahluwalia

Migs were just terrible, right?

Matein Khalid

Oh, the Widowmakers.

They were called the Widowmakers. Yeah. Yeah, yeah, absolutely.

Absolutely. I mean, if you look at training and accidental accidents, because obviously, pilots have to do intensive training. Yeah, the Migs were one aspect of it.

The second aspect is Russia’s capacity itself is running low because of Ukraine. Because of Ukraine, I mean, a scale of the losses that they have sustained, you know, it shows you the desperation. They’ve now had to import North Korean drone hardware, and North Korean soldiers now, mercenaries, if you will, to center the front in Ukraine.

Siddhartha Ahluwalia

But Trump has mentioned that before he comes into office in January 2025, he’ll make sure that both the wars, the Russia-Ukraine war.

Matein Khalid

I think that war is, I mean, I hope so. You know, you don’t want any wars, right? And that’s one thing that I think, basically, it’ll become, yeah.

Now the question is, will Putin accept a deal? Because Putin has said that, okay, give me Crimea and the, you know, the four oblasts and the Donbas. He says, well, you know, we already had that.

You already had that before 2022. A veto power over the foreign policy of Ukraine? Yeah, I don’t think anybody wants to bring Ukraine into NATO anymore.

That is not even on the cards. France and Germany will oppose it tooth and nail. And yeah, maybe Ukraine becomes the next Finland.

But on the other hand, look at what he’s lost. He’s got Poland doubling or tripling its defense spending. Germany, basically re-arming.

You’ve got Japan re-arming. You literally have Sweden and Norway, sorry, Sweden and Finland now as members of NATO, a new strategic front against Russia. So I would say, net-net, this war has had no winners.

This war has had, I mean…

Siddhartha Ahluwalia

Similarly, Trump has asked Israel to wrap up its act in Hamas.

Matein Khalid

Yeah, which is now also happening. I think we are reaching to a conclusion there too, because Hamas’s military capacity, and therefore its capacity to pose any kind of a military threat to Israel from Gaza, other than random acts of terror, right, has been done at a horrific cost, of course, at a horrific human cost. But Hamas is no longer a threat to Israel. Hezbollah might be.

Siddhartha Ahluwalia

Yeah.

Matein Khalid

Hezbollah might be.

Siddhartha Ahluwalia

Yeah, he is just getting out of Iran.

Matein Khalid

But yeah, but then you get back to Iran. So the question now is, I mean, in fact, they claim, I mean, the last Israeli raid on Iran, supposedly was 140 fighter bombers, including reconnaissance and intelligence planes, tankers to refuel them, you know, to refuel them trip back.

And they took out some weapons factories near Tehran, missile making factories near Tehran. They took out missile launch pads within Tehran. And they took out the air defense batteries that protected Tehran, Isfahan, Shiraz and Ahvaz, four strategic cities in Iran, S3 and S4 batteries, air defense batteries, Russian armaments.

So Iran, in a sense, does not really have a functioning air force, and now does not have an air defense system. So are they going to escalate before and take out Iran’s nuclear facilities? I don’t think they can physically do that without help from the US or at least that’s what…

Siddhartha Ahluwalia

I think the US would want to clear it up. And folks have accused the Biden government of, you know, siding with weapon makers to make sure these wars continued.

Matein Khalid

RTX Raytheon, up 50%. They were some of the best performing. Yeah, to a certain extent.

Is there a military-industrial complex? Yes, of course there is. I mean, they spent hundreds and millions of dollars in lobbyists, many of the top generals and admirals of the Pentagon.

Siddhartha Ahluwalia

They are hired later by…

Matein Khalid

They are hired. It’s a revolving door. Northern Virginia is regarded as one of the most AI intensive areas in America, because there were so many contractors and, you know, the national security establishment.

There are 16 American intelligence agencies, right? And, you know, hey, look at the Palantir stock, right? Palantir actually incidentally was was basically funded from a VC point of view by the CIA, Intel Q, which is called Q-Tel, Intel Q.

And the Q, which is, of course, a reference to the Q in the James Bond movies, is actually a lady, a very sweet suburban housewife. I cannot say anything more than that. But I met her once.

Yeah, I met her once. Yeah. On a VC thing, you know, she was the head of that for three years, and then she became a VC of her own.

Yeah. Yeah. So I met her at an investment conference.

And I said, Oh, my God, this is too much. And she said, Yeah.

Siddhartha Ahluwalia

So let’s hope these, both the wars end so that the world can be in a better place starting the new year.

Matein Khalid

I know, Sid. My heart breaks, you know, when I see footage of Ukraine, footage of the Middle East, wars are terrible. Human beings. I mean, this is not what we think. Remember, two and a half thousand years ago, we had your namesake, right, Siddhartha, I mean, the Buddha. The Buddha came as a gift to mankind and the Buddha’s message.

So I think, given that our technological and industrial curve has been a hockey stick, but our moral curve, the moral curve of the human evolution has gone down.

Siddhartha Ahluwalia

And do you think that the world needed a right-wing capitalist leader like Trump to end these wars?

Matein Khalid

Begs the situation, right? What do you consider left-wing, right-wing, you know? Trump is fundamentally an isolationist, number one.

Siddhartha Ahluwalia

What do you mean by that?

Matein Khalid

And by the way, that’s an isolationist. Hey, we got to do what we got to do in America first. We are not going to become the Chowkidar, the Shandam, the policemen of the world, right?

So we don’t like these globalist elites, right?

Siddhartha Ahluwalia

What Bush, Obama and Biden have been doing, right? They want to say we are the gatekeepers of the world.

Matein Khalid

But even the Republicans, right? The old Republican Party too. I mean, let’s face it, who got us into Iraq?

Who got the world into Iraq? That was George W. Bush, the icon of the Republican establishment, right?

Son of a sitting president of the 42nd, right? 41, the 41st president, George Herbert Walker Bush, grandson of a senator from Connecticut, a partner at Brown Brothers Harriman, a complete product of the Eastern establishment, even though he liked to think that he was a Texas wildcat and talk with a Texas accent. Even got, you know, even was a graduate of the same Yale, which Clinton and Hillary came from, right? The same Yale. So in a sense, the Republican Party and the Democratic Party, I feel, have completely morphed into something unrecognizable.

Siddhartha Ahluwalia

But in my view, the last strong right wing or a capitalistic leader that the US had was Bill Clinton. The rest of the leaders after Bill were more like George W. Bush, Obama, Biden.

They have in essence, all been socialists in their policies and trying to dictate what happens to the world.

Matein Khalid

I mean, you are right in the sense that the National Economic Council was actually formed by Clinton under Robert Rubin, the former CEO of Goldman Sachs, this institution which even now exists. And Clinton did his best not to get involved in foreign wars, right? It took him four years to intervene in Bosnia.

And that is when the Serbian atrocities became just too terrible to ignore. So yeah, so clearly that was the case. But Clinton also inherited, you know, a very different world.

Because when he came to power in 1992, not coincidentally, it was the month after the Soviet Union completely disintegrated. And its role as a superpower literally disappeared. The Cold War ended.

Bloodlessly, I might add, or relatively bloodlessly. So he inherited, then also he was able to balance the budget. The debt was not such a big problem.

He also inherited the birth of the Internet Revolution, August 9th, 1995. I know August 9th because that is my birthday, right? Not 1995.

I certainly wasn’t born as late as that. But I remember that was when Netscape had its IPO. You know, the first, literally, I would say that start, most economic historians begin to say that was the start of the Internet era.

And for the next five years after that, I mean, the dollar just shot up because capital flows were coming into America on such a scale. The irony is that in the foreign exchange market, probably the biggest financial market in the world today in terms of activity, seven and a half to eight trillion dollars a day traded. The dollar is 90% of the, you know, either one side or second side of that.

But it’s not, the market is not on trade flows. It’s on capital flows. Capital, like capital flows, are like maybe 15 times that of trade flows.

Just like in the oil market, the world, you know, the red barrel market, which means the physical oil market, tankers going from one country to another, from Saudi Arabia, Saudi Aramco to India, or Taiwan, or Japan, or Singapore, about 103 million barrels a day. But the amount of oil traded in the futures, options, swaps, and over-the-counter derivative markets in the world are 20 times that amount. So in reality, it’s capital flows or interest rate differentials that dictate foreign exchange rates.

We’re seeing that this year in terms of the rise of the dollar. And we saw that same process in Clinton’s second term, which coincided with the internet bubble. So in many ways, the globalization of financial markets is very real, very tangible, and has had a huge impact in correlations and philosophies of investing.

You know, I really feel that is the case.

Siddhartha Ahluwalia

Why do you call today, we are sitting in December 2024, why do you call this a unique inflection point in history?

Matein Khalid

Well, you know, Sid, you just see the sheer range of things that have happened just this week. We are, I think this is Thursday evening, the 5th of December. But just look at this week, we have seen, Martial Law declared by sort of a renegade president of South Korea, President Yoon, Suk Yeol, to take his full name.

But the guy went totally berserk. He accused his opposition in parliament of being in cahoots with the North Korean dictatorship. And, you know, declared Mashal law.

Siddhartha Ahluwalia

Dictatorship?

Matein Khalid

Yeah, yeah, yeah, almost, almost exactly. I mean, Martial Law means military rule. And this is a country that has had a terrible, terrible, terrible history of Martial Law.

I still remember in my youth, you know, one of the dictators, whose name is seared in my mind, because I saw a BBC report in 1980 on him, was Chun Doo Hwan, a general, who literally there were students protesting in a city called Gwangju. And he ordered the military to fire on them. It was South Korea’s Tiananmen Square moment, 1980.

Now, this is not what you expect from a democratic country that’s been, you know, they call Korea the miracle on the Han River. You go from absolute poverty. The country was absolutely destroyed during the Korean War.

It had a per capita income in 1960, which was less than that of East Pakistan, let alone West Pakistan. One of my uncles in the 70s, actually was sent as an economic and industrial advisor to the Korean government, you know, when they were building up the model. So this is a country that really is, you know, today probably has a per capita income well into the 60,000 range.

So this is a country that in every sense of the world is a democratic country, right, is a democratic country.

Siddhartha Ahluwalia

60,000 USD.

Matein Khalid

Oh, yeah, yeah, yeah. Yeah, up from like 200 a year to 50,000. So it’s really an economic miracle.

I mean, the country used to basically, Pyong and Seoul were both, I think, devastated during the civil war. So this was a country that literally was on the edge of starvation in the 1950s. And in one generation alone becomes a wealthy country.

It’s like Viksit Bharat done, except not in a two-generation or three. If you assume that India’s post-license Raj era reform movement started in 1991-92, right, and take that as ground zero, then we are, let’s say, a generation in, we are let’s say, 34 years in. And we are looking at 24/7 to become a developed country.

They telescope that whole process into one generation. And literally went, I mean, as late as the late 1980s, Korea was still under the generals, under martial law. And then there was a democratic transition.

And that transition has been quite total. So for suddenly out of the blue to be declared, you know, Martial law, it just created havoc in the market. You had, in a sense, the Korean war, free falling.

You had foreigners dumping all Korean ETFs, Korean stocks. And Korea right now is, you know, I mean, look at their brands, right? Hyundai, Samsung, I mean, Samsung itself is a Republican itself.

So I thought you could see contagion, especially since this coincided with the fall of the French government. So Michel Barnier has been forced out as Macron’s Prime Minister. Now that too has got consequences.

Today, France, a country which is really the anchor economy of the EU. Second largest after Germany, right? And basically, the EU is nothing else but a French and German joint venture collaboration.

Ever since Valery Giscard d’Estaing in the 70s with Helmut Schmidt, and then Mitterrand and Chirac vis-à-vis the opposite numbers in Germany. And lastly, now, you know, Scholz and Macron, but both of them are political lame ducks for different reasons, for different reasons. So you have a fall of a French government.

You have French bonds now trading at a spread, the OATs, Obligations assimilables du Trésor in French, right? OATs are now trading over the German bunds, Bundesobligation is, right? Not what they meet in Punjabi, of almost 80, 90 basis points.

And that is as high as what Greece was trading at, right? During the sovereign crisis, the Euro 2012 crisis. Risk of reversals in the foreign exchange markets are pointing towards parity in the Euro.

The Euro in turn happens to be 57% of the US dollar index. So you can imagine the impact from mayhem in the government bond markets of the world as well as in…

Siddhartha Ahluwalia

So the bond markets are collapsing. That’s what you are saying.

Matein Khalid

Well, in France, they are. Yes, in France, they are. In France, they are.

And that was so partly, that partly explains why we had a sudden fall in treasury yields this week, which actually, I believe, is more due to safe-haven buying than any kind of. And then, of course, you had a third geopolitical black swan that just came out of nowhere. I shouldn’t really say that because it was under hibernation.

Which was the third? In Syria. In Syria, the second largest city in Syria, which was under the control of the Assad government based in Damascus, was literally attacked and taken over without a fight by a group that used to be allied with Al-Qaeda.

And probably, this might cost me a visa to go to my beloved Istanbul, Turkey, Turkish intelligence. It’s called the Hay’at Tahrir al-Sham, which means the front for the liberation of Syria, but was formerly known as Al-Nusra and run by a guy called Abu Mohammad al-Julani, who was clearly a jihadist. This guy was an emir of Al-Qaeda at one time.

So in a sense, he’s now been prettified and tarted up to look more moderate. But now, they have already taken over Aleppo, the second largest city. And Aleppo is one of the oldest cities in the world.

So you have a Christian population there, you have an Armenian population there, you have an Alawite population there, Kurdish population there. And God knows, have these people really changed their stripes or not? I would tend to doubt it.

They have now taken over or besieged another city called Homs. And next thing you know, they might be in Damascus. In fact, rumors were already flying around that Assad has left the country.

Well, he had over the weekend, but that was just to consult the Russians. Basically, he went in a panic. Now, why is this important?

This is important because this is setting up a proxy superpower conflict again. Because obviously, the Russians and the Iranians, this is their one client in the Arab world, whom they went all out to protect. And basically, in 2016, when everybody thought that Assad used poison gas on a civilian population, Obama pretty much told him that you’ve crossed a red line.

And they did nothing about it, literally did nothing about it. And that gave an opening to the Russians to come. They bombed the hell out of Aleppo, which at that time was held by the rebels, after a four-year struggle, and saved the throne, so to say.

This is a dynastic dictatorship that has been in power for 10-11 years by a minority sect, 10-12% of the Syrian population. The population of Syria used to be 22 million, but of course, 13 million displaced people, half a million dead. So, a brutal civil war.

Now, it could be the end game. It could be the end game. Maybe the opposition takes over Damascus.

But then what does that mean for the ethnic balance of Syria, for genocide? So, the shockwaves of this could really ripple across the Middle East. So, you have Europe in complete turmoil.

I would say an existential crisis for the Euro. And this can escalate next year, especially if Trump starts putting tariffs on Europe. In South Korea, you have now a sort of democracy.

You have an economy where you thought it was an advanced world, first world economy. But clearly, it’s amateur hour in Seoul. The president is going to be impeached.

And when the president is impeached, well, you can forget about economic reform. You can forget about South Korea being upgraded by MSCI from emerging market to developed markets. And if this is the case with South Korea, well, that kind of devalues the case for investing in emerging markets or Asian equities vis-a-vis Western fund managers.

Siddhartha Ahluwalia

But Modi is the first, as you had mentioned in the offline conversation, to visit all the states of UAE, all the emirates after 40 years.

Matein Khalid

Yes. So, 1981. And then Modi came in, I think, 2015.

He has made seven state visits to the UAE. Seven state visits to the UAE. You’ll say, oh, there’s 9 million Indians in UAE.

But there were always millions of Indians in the UAE between 1981 and 2014 also, right? I’m married to one. So, in a sense, and oh, my wife and daughter loved it.

I think it was 2018 or something. She had never seen a political rally. So, for her, it was like a rock concert.

My daughter, it just opened her eyes. Yeah, he’s taken that effort. He’s taken that effort.

He’s built the private personal relationships. And today, you can actually see that in terms of financial flows. You literally can see that in financial flows in the last five years to eight years.

You find all the major sovereign wealth funds in, you know, the marquee deals of India, right? Like whether it’s Jio or whether it’s Tata Powers, renewable power, whether it’s some of the Adani companies. Yeah, for some of the Adani companies, Sheikh Tahnoon ‘s conglomerate, International Holdings is very much involved in that.

The Qatar Investment Agency, the Kuwait Investment Agency, Saudi Aramco. Saudi Aramco is thinking in terms of building downstream assets in India. I don’t think the private sector has treated India as a structural bull market.

You know, they have not really been that. See, partly, it’s a consequence of the depreciation of the rupee, which now you and I obviously know, you know, that currency rates are a function of relative inflation differentials. So, we can calculate those kinds of these things.

But even some of the expats over here, you see, oh, my God, oh, my God, we cannot invest in five years in India. And they miss out a lot on that, you know, with that thought process that the rupee is a constantly depreciating thing. Of course, 4%, 5% depreciation of the rupee can be taken for granted.

But if I can make, you know, 20% return, IRR 25% return, IRR in a good stock or in a venture capital fund or the private equity fund, then it merits.

Siddhartha Ahluwalia

One thing which I want to ask, you know, since we have the last five minutes of the podcast, what’s your view on the Neon thesis of investing in Indian entrepreneurs, especially second times, building software from India and selling in the US and global markets?

Matein Khalid

I think India is one of the great entrepreneurial and risk-taking cultures the world has ever seen. Literally, I would say that. Because, you know, if you read the Roman Empire, you literally had a thriving trade.

I’m reading Will Dalrymple’s book right now, The Golden Rule. A thousand years ago, I mean, Ramses II, the pharaoh, his mummified body had Indian pepper in there, right? There were complaints in the Roman senate that the Roman women were buying silks and, you know, chiffon sarees, I suppose the equivalent, diaphanous clothes from India, from Indian traders in Egypt, because Egypt became part of the Roman Empire after the Battle of Actium.

And you have all these ports in Muziris to Gujarat, where you find Roman coins still being found. Really huge amounts of Roman coins, they’re all there on eBay. So you had the Alexander the Great’s army, both the Macedonian side and the Persian Empire, which he fought, the superpower of that time.

Who do you think provided the clothes? The guys from the Indus Valley civilization. The early Harappa civilization was trading with Oman and with Sumerians, with the Sumerians.

So you have seen globalization being part of the Sananda, the Indian ethos, for millennia, not just centuries, but millennia. As late as 1707, the year Aurangzeb died, India was 27% of global GDP and a significant part of world trade. So I think there’s nothing new under the sun there.

But in terms of technology, yes, I think some original technology is coming out of India. And I believe this is something that over the course of the next 10 years, I think Trump will bulldoze the big technology platforms into India, because that’s part of his thesis. I think Modi will allow him to do that.

And I think that will create new ecosystems, especially in the world of AI. So I’m very bullish on this thesis. I think healthcare has got to be one of the best applications of AI.

The industries where the applications of AI are so manifest, the return on investment is so manifest. I think Indian IT services companies will be, their stock prices and valuation will be ghosted up by AI-based orders. But even if you look at, in terms of Indian exports, pharmaceutical exports, CDMO, hospitals, pharma, $9 billion.

Okay, it’s nothing like software, right? Software is $100 billion out of $200 billion to the US. But I think this area is going to grow.

So I think the neon thesis is, you’re doing a favor to the world, Sid. You’re doing a favor to the world. And you’re putting the world, you’re basically acting like a catalyst in connecting, putting people on the path of great entrepreneurs who would otherwise remain unknown to them.

Companies and entrepreneurs who would otherwise remain unknown to them.

Siddhartha Ahluwalia

Thank you so much, Matein. It means a lot coming from you.

Matein Khalid

It’s my pleasure, Sid. It was such a pleasure to meet you, to meet your colleague Atharva. I think, you know, we’re certainly here in Dubai and wish you all the best.

Siddhartha Ahluwalia

Thank you so much.

Matein Khalid

And obviously, you’re a friend.

Siddhartha Ahluwalia

Yeah, it’s a great conversation. And I didn’t realize, I didn’t touch my glass of water ever. And I thought that you didn’t even touch it.

Matein Khalid

Yeah, exactly. Exactly.

Siddhartha Ahluwalia

Thank you so much, Matein.

Matein Khalid

Maybe we can make it up for now and toast each other with a glass of water. Thank you very much.

Siddhartha Ahluwalia

Thank You so much.

Matein Khalid

I enjoyed my session.