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Israel, the Fed, IPOs, and Fintech · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 1: my co host Matt Miller.
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Speaker 1: All right, let's get to the latest on Israel, because
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Speaker 1: it just once again we're just waiting it seems like
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Speaker 1: for Israel to make the next move here and how
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Speaker 1: decisive it will be. Mick mulroy joints us. He's a
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Speaker 1: former CIA Power military officer and he's a co founder
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Speaker 1: of the Lobo Institute. Mick, thanks so much for joining
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Speaker 1: us here. It just it seems like everything we see
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Speaker 1: and read from all the reporting that Israel is going
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Speaker 1: to go big into kaza I guess the question is
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Speaker 1: when and then what do you think? I guess more importantly,
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Speaker 1: what do you think a realistic objective for them is?
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Speaker 3: Well, it's good to be with you guys. I do
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Speaker 3: believe it's coming up. So I think we're in the
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Speaker 3: last stages of preparations. We've seen the preparatory fires to
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Speaker 3: soften up the targets, take out some leadership. We've seen
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Speaker 3: some small incursions, probably by special operations forces to try
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Speaker 3: to find the best route for the main body to
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Speaker 3: get in and potentially to try to get information on
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Speaker 3: where the hostages could be. And now we're going to
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Speaker 3: see a giant movement of all these tanks and armored
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Speaker 3: personnel carriers and combat engineer vehicles. They're going to leave
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Speaker 3: the assembly area. They're going to get in their attack
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Speaker 3: formations and then likely enter from ares up at the top,
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Speaker 3: because that's the best when it comes to terrain for
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Speaker 3: all these formations to get into and then funnel in
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Speaker 3: to the top going straight toward Gaza City. And to
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Speaker 3: your point, they're going big and it's going to be violent.
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Speaker 3: They'll probably have some come in from the sea to
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Speaker 3: create a dilemma from Hamas, maybe some coming from the
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Speaker 3: air to try to drop behind them in central in
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Speaker 3: central Gaza to also to try to create a dilemma
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Speaker 3: and develop them. But once they into the actual fighting,
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Speaker 3: it's going to be blocked by block I'm hearing the
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Speaker 3: Israeli planners that talk to me talk about Upper and
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Speaker 3: Lower Gaza. Upper being buildings and everything that you see
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Speaker 3: normally in the city lower is all these tunnels is
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Speaker 3: around three hundred miles of tunnels down there, and that's
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Speaker 3: going to be a bear militarily to try to conquer.
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Speaker 1: How deep are the tunnels?
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Speaker 2: Why can't A couple of questions I've had, and maybe
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Speaker 2: you can help, Mick, how do they block the sea border?
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Speaker 2: I mean, why wouldn't people in Gaza be able to
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Speaker 2: get out on boats or you know, even swimming as
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Speaker 2: rudimentary as it sounds, right, they're on the sea.
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Speaker 1: How do they block that?
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Speaker 3: So there's been a blockade, enable blockade and placed by
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Speaker 3: the Israelis for some time because that was one of
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Speaker 3: the means of which are on quite frankly, smuggled weapons
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Speaker 3: into Gaza. The other was through the tunnels leading into Egypt.
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Speaker 3: So that's been blocked. If boats were allowed in, there
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Speaker 3: could be some X bills, uh, you know, civilians leaving
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Speaker 3: that way. But I don't think the Israelis are letting
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Speaker 3: any any any vessels in any of the c space
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Speaker 3: right off the coast of Gaza. I do think they'll
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Speaker 3: try some kind of amphibious landing, maybe just a small
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Speaker 3: special operations type force or more like a giant or
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Speaker 3: you know, a large marine formation like the like the
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Speaker 3: Marine Corps type formation hitting hitting the beach. Almost everybody
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Speaker 3: is going south via vehicle or put I.
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Speaker 2: Also wonder, you know, we wondered, uh, we talked about
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Speaker 2: the objective for Israel, but going back to the terrorist
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Speaker 2: attacks that we saw last week, why did Hamas do that?
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Speaker 2: Other than you know, uh, spreading terror and I guess,
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Speaker 2: you know, retaliation against what they feel has been done
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Speaker 2: to them. Do you think they're trying to bait the
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Speaker 2: Israelis into Gaza.
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Speaker 3: Yes, and that's a good that's a good point of
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Speaker 3: your question. So when they attacked Israel like this, they
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Speaker 3: had to know that this was going to happen, and
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Speaker 3: I think they did. Why did they do it? Obviously
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Speaker 3: to your point terror, they're a terrorist organization, been designated
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Speaker 3: as such as nineteen ninety seven. But also they want
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Speaker 3: to disrupt all of the diplomatic efforts in the region.
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Speaker 3: We've already had the Abraham Accords Saudi Arabia and Israel.
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Speaker 3: We're getting close to normalizing relations. This is not good
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Speaker 3: for Hamas, it's not good for Iran. And if it's
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Speaker 3: not good for on it's not good for Hamas or Hesbela,
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Speaker 3: and that's potentially part of what you're trying to do.
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Speaker 3: And then the last part militarily is to get them
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Speaker 3: into a fight like this, because the IDEF is one
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Speaker 3: of the most advanced militaries in the world. But urban fighting,
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Speaker 3: tunneled fighting, is subterranean fighting is it takes away a
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Speaker 3: lot of those advantages. And they have this place wired
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Speaker 3: literally to fight the benefit on their side. So that
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Speaker 3: is why they want the IDEF to get into this
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Speaker 3: battle inside Gaza City for example.
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Speaker 1: And Mick, I mean, have do you think the IDF
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Speaker 1: has been able to identify over the years who actually
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Speaker 1: is in Hamas? I mean, the leadership is one thing,
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Speaker 1: but of the fifteen hundred or so Hamas terrorists that
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Speaker 1: came across the boarded, does Israel know who they are?
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Speaker 4: It?
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Speaker 1: Did they know? Really? Can they really neutralize Hamas as
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Speaker 1: a terrorist organization?
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Speaker 3: So there's gonna be a lot of the Hamas fryers
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Speaker 3: are going to fight, so they're they're going to die,
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Speaker 3: and that's gonna be Then they're going to gather all
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Speaker 3: those and then the ones that they capture, they're going
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Speaker 3: to go through every camera that and of course Israel,
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Speaker 3: like most modern countries, has cameras everywhere and try to
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Speaker 3: make sure that they've identified everybody either dead or alive.
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Speaker 3: It took part of that operation, and they also keep
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Speaker 3: detailed records on who they believe is in Hamas and
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Speaker 3: their leader Sinwar is in Gaza City. He is he
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Speaker 3: is one of the most significant leaders in Hamas. He's
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Speaker 3: going to be target number one. And they've already taken
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Speaker 3: about twelve of the sea and your leaders around him
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Speaker 3: out so far, just since the preparatory fires started.
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Speaker 1: And Nick, one of the question I asked kind of
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Speaker 1: consistently to guests on this topic is how much collateral
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Speaker 1: damage do you think Israel is willing to inflict in
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Speaker 1: order to achieve their military objectives.
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Speaker 3: Well, I would hope and I do believe they will
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Speaker 3: adhere to the law of armed conflict, which is to
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Speaker 3: do everything you can to limit civilian casualties. And the
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Speaker 3: first step is getting this humanitarian corridor that allows civilians
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Speaker 3: to leave northern Gaza and move to southern Gaza, hopefully
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Speaker 3: in a UN sponsored safe haven that's monitored. There's plenty
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Speaker 3: of effort underway to set that up, but I do
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Speaker 3: think Israel the IDF will do everything they can to
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Speaker 3: limit sivilian casually. That said, this is urban fighting with armored,
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Speaker 3: armored personnel carrier, multi dimension. There's no doubt that Hamas
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Speaker 3: is going to hide behind civilians. There's no doubt have
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Speaker 3: buildings wired, in tunnels wired. So there's going to be
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Speaker 3: a lot of civilian casualties, which is why I think
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Speaker 3: there's been so much effort recently to get as many
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Speaker 3: civilians as possible, and I think last I heard was
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Speaker 3: five hundred thousand have left northern Gaza. Everybody that can
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Speaker 3: leave should lead.
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Speaker 2: You know, last week was much harder for me than
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Speaker 2: I expected mentally, and I don't even have a dog
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Speaker 2: in this fight. It just hurt to see all of
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Speaker 2: the damage inflicted by the terrorist attack first and then
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Speaker 2: looking at the pictures of women and children in Gaza
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Speaker 2: in the hospitals was also I mean, the little.
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Speaker 1: Girls look like my little girl.
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Speaker 2: How do you deal with this as a soldier, as
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Speaker 2: a leader, how do you deal with that part of it?
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Speaker 3: So that's the part I think that's the most lingering
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Speaker 3: and the stuff that causes quite frankly, veterans the most
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Speaker 3: grief along with losing their friends for the longest period
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Speaker 3: of time. You know, you'd hope that if, quite frankly,
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Speaker 3: if adult men would star wars, they should be the
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Speaker 3: ones fighting it, right, not little kids as we see
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Speaker 3: around the world in so many places, and certainly not
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Speaker 3: all these innocent civilians who just happen to be caught
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Speaker 3: in the crossfire. As you said, whether it's in Israel,
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Speaker 3: whether it's in Gaza, or whether it's in Ukraine. It's
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Speaker 3: just unacceptable. It's why most of the UN protocols came
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Speaker 3: after World War Two is to try to prevent civilian
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Speaker 3: casualties like this. They just should not be part of
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Speaker 3: anybody's combat operations and their plans. They should be completely excluded. Unfortunately,
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Speaker 3: look like Hamas's sole purpose, quite frankly, was to kill
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Speaker 3: civilians when they went into Israel. They actually bypassed many
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Speaker 3: of the ideas there is. Now we need to try
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Speaker 3: to do everything we can to save civilians in Gaza.
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Speaker 1: All right, Mack, thanks so much for joining us. As always,
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Speaker 1: Mick mulroy of the lovelod Stude.
8:48
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9:00
Speaker 1: Apps Bloomberg News. How was some reporting thing one of
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Speaker 1: our mostly most read stories of the day. Apple's iPhones.
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Speaker 1: They're off to a sluggish start in China, that's according
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Speaker 1: to a study. So we want to bring in Ed Ludlow.
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Speaker 1: He knows all about this stuff. He does a lot
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Speaker 1: of work with the folks in Kupertino. Ed Lolo joins
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Speaker 1: as he's a host of Bloomberg Technology. So, Ed, what's
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Speaker 1: kind of the background here for iPhone sales in China?
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Speaker 6: I guess it's whether you look at it through the
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Speaker 6: lens of an economist or you look at it through
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Speaker 6: the lens of a smartphone market analyst. But this is
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Speaker 6: counterpoint research data that shows for the first seventeen days
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Speaker 6: after the iPhone fifteen went on sale in China, sales
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Speaker 6: are down four point five percent versus the same comparable
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Speaker 6: period a year ago when the iPhone fourteen went on sale.
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Speaker 6: And there are some caveats in that data, right, because
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Speaker 6: when Apple releases a new generation of iPhone, there is
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Speaker 6: multiple variants.
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Speaker 7: So in this case, the iPhone fifteen and fifteen.
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Speaker 6: Plus the base models and then the pro and Promacs,
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Speaker 6: the more premium models, but overall it's down. And you know,
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Speaker 6: China's economy is super interesting right now. It's an aging economy,
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Speaker 6: but youth unemployment's really high. And I think we get
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Speaker 6: a GDP print for China on Wednesday that's likely to
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Speaker 6: show modest uptick on growth quarter on quarter, but below
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Speaker 6: it's five percent target that Beijing has on an analyzed basis,
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Speaker 6: So it could be a softness thing, but it's also
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Speaker 6: a more competitive smartphone market domestically as well.
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Speaker 2: Well, and they've made rules that you're not allowed to
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Speaker 2: bring an iPhone in to certain places.
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Speaker 1: Right it was already uncool, I guess or.
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Speaker 4: Not?
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Speaker 2: I like that, Yeah, jibe with the Communist Party vibe.
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Speaker 2: But is this a China specific problem or do we
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Speaker 2: expect to see reports like this for iPhone sales across
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Speaker 2: other regions as well?
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Speaker 6: So what's fascinating about it is, according to the Counterpoint data,
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Speaker 6: it is a Chinese China specific problem because the Counterpoint
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Speaker 6: d it has showed that on the first nine days
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Speaker 6: of sales in the US, iPhone fifteen was up significantly
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Speaker 6: compared to the iPhone fourteen sales for that first nine
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Speaker 6: day period a year ago.
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Speaker 7: So that's interesting.
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Speaker 6: It also is completely counter to what we learned so
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Speaker 6: far this year that in the June course or the
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Speaker 6: quarter ending in June, what Apple told us was that
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Speaker 6: China was the point of strength in that domestic Chinese
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Speaker 6: or Greater China market. Apple had actually swung to top
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Speaker 6: line growth of eight percent from a three percent decline
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Speaker 6: the quarter before, and it was principally driven by iPhone
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Speaker 6: at a time where US or North American smartphone sales
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Speaker 6: were really weak. So the story we're playing seeing play
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Speaker 6: out reading the tea leaves is that there's a really
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Speaker 6: big tech upgride cycle going on in the US, not
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Speaker 6: so in China. But remember in the background there are
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Speaker 6: domestic smartphone market pressures because some of the Chinese players
11:54
Speaker 6: have surprised us with competitive handsets in that period as well.
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Speaker 1: So, I mean, I guess if I were an Apple
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Speaker 1: executive or fire an investor, my biggest fear would be
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Speaker 1: just as nationalism on the part of the Chinese care
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Speaker 1: are they just not buying American or are they just
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Speaker 1: not buying Apple in this particular case.
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Speaker 2: And they're like twenty percent of your customer base, right A,
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Speaker 2: they make a huge chunk of Apples.
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Speaker 6: Well, from a revenue perspective, I mean, you make both
12:19
Speaker 6: excellent questions, just really quick that even if your unit
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Speaker 6: sales are down overall, remember that the Chinese consumer skews
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Speaker 6: towards the higher end product, the pro and promax, So
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Speaker 6: you can still grow revenue because of higher average selling prices,
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Speaker 6: which is something that Apple's relied on. But I guess
12:36
Speaker 6: it doesn't matter if you look at it as an
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Speaker 6: economist or as a market analyst. How do we price
12:40
Speaker 6: in or understand the effects of that communist policy that
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Speaker 6: Matt was talking about. What Bloomberg's reported is that China
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Speaker 6: central government basically said to all government agencies and state
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Speaker 6: back corporations, tell your staff no iPhones. You cannot bring
12:55
Speaker 6: an iPhone to work. You have to use a domestic model.
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Speaker 6: And everyone was pretty chill and sanguine about that at
13:02
Speaker 6: the time the news came out. We don't know for certain,
13:04
Speaker 6: but the question we're posing is does this data show
13:07
Speaker 6: that this put off consumers in China from going out
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Speaker 6: and buying because their government said you can't use iPhones
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Speaker 6: in the workplace, all right.
13:15
Speaker 1: So I mean, I guess is there do we have
13:17
Speaker 1: any response out of Cooper Tino where they, to their
13:20
Speaker 1: extent of their concern.
13:21
Speaker 7: Here no Apple define to comment on the story.
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Speaker 6: But remember the guidance, right, The guidance was that iPhone
13:28
Speaker 6: sales would accelerate into the last three months of this year.
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Speaker 6: This data conflicts with that guidance.
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Speaker 2: I also feel like it's we do get stories worried
13:39
Speaker 2: about iPhone sales every cycle, right is that? Yes, just
13:44
Speaker 2: we're always wrong my old exactly it is true, and
13:48
Speaker 2: this is a company that loves to under promise and
13:51
Speaker 2: over deliver as well.
13:52
Speaker 1: So I don't know.
13:54
Speaker 2: I mean, it's interesting stuff, yeah, and we'll put it
13:57
Speaker 2: into our into our models, ed.
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Speaker 7: But so I don't know.
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Speaker 6: I do think what's changed this time around is that
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Speaker 6: the big tech surprise was that Huawei brought out the
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Speaker 6: Mate sixty Pro as a competitive five G enabled handset
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Speaker 6: in China with a semiconductor or a processor, which was
14:17
Speaker 6: a generation ahead of what we thought China could do.
14:19
Speaker 6: And if you look at the body of the story
14:20
Speaker 6: that Bloomberg wrote, many analysts on Wall Street now believe
14:24
Speaker 6: that Huawei will overtake Apple in China, and that there
14:28
Speaker 6: will be, whether it's nationalism or it's just simply a
14:32
Speaker 6: price point issue. There is now a smartphone available in
14:36
Speaker 6: the market made in China by a Chinese company that
14:39
Speaker 6: from a tech perspective at least gets closer to Apple's iPhone.
14:43
Speaker 2: But the ux there, I mean, ed, I imagine you're
14:47
Speaker 2: playing around with a lot of new phones other than Apple, right,
14:53
Speaker 2: does is the operating system on anything else?
14:55
Speaker 1: Approach at all? The elegance of Apple's.
15:00
Speaker 6: Not really I mean, and bear in mind that the
15:04
Speaker 6: Chinese consumer buys motivated by technology.
15:08
Speaker 7: They want the latest technology. You know.
15:10
Speaker 6: I was being asked on TV show earlier about the
15:12
Speaker 6: comparison between LVMH and Apple, and yes, true, there is
15:15
Speaker 6: kind of a Chinese middle class consumer that buys Apple
15:19
Speaker 6: because of the Western brand recognition, But they're really highly
15:22
Speaker 6: motivated about technology advancement and the A seventeen processor in
15:27
Speaker 6: this iPhone fifteen pro and Promax, Apple's latest silicon was
15:30
Speaker 6: widely to be believed to be a driver of sales
15:33
Speaker 6: because of its performance.
15:35
Speaker 1: All right, great stuff, as always appreciate it. We like
15:37
Speaker 1: the microphone in the shot there. That is very cool.
15:40
Speaker 1: That's a Tom Keen effect. I think for those that
15:43
Speaker 1: watching as.
15:43
Speaker 2: You can see the Golden gate Bridge behind him, what
15:45
Speaker 2: an amazing view.
15:46
Speaker 1: Our offices in San Francisco are outstanding, which is no
15:49
Speaker 1: surprise to guess. They're outstanding in every city where we
15:52
Speaker 1: have an office. I don't know how they do it.
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Speaker 1: You know, Matt and I were just talking we may
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Speaker 1: not be long here for this radio business John, because
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Speaker 1: we're talking about Matt and I are going to go
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Speaker 1: maybe start a private credit fund. I think that's where
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Speaker 1: we are, and an ATF and an ETF. Okay, we'll
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Speaker 1: do an ETF on that as well. So so alternative capital,
16:34
Speaker 1: alternative markets a growing source of opportunities for retail investors,
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Speaker 1: not just big institutional investors. Michael Whites joins us. He's
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Speaker 1: a founder and president of yield Street. Joins us live
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Speaker 1: here in our Bloomberg Interactive Brooker studio. Michael talk to
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Speaker 1: us about yield Street, what do you guys do there,
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Speaker 1: and then we'll dig into the kind of the market option.
16:49
Speaker 8: Well, thanks for having me. It's always great to be
16:51
Speaker 8: back here at Bloomberg. So at yield Street, we are
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Speaker 8: focused on making alternative investments more available. So we want
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Speaker 8: to help people rebalance their portfolios, not to just include
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Speaker 8: stocks and bonds, but to have private market investments alongside
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Speaker 8: do is invest in institutional quality opportunities, think things like
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Speaker 8: private credit as you just mentioned, private equity, real estate,
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Speaker 8: fine art, legal finance, structured notes. Basically trying to help
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Speaker 8: people access a diversified portfolio of private investments. We put
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Speaker 8: those online or on our app, and we have over
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Speaker 8: four hundred thousand in our community who are investing in
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Speaker 8: these products all across America.
17:29
Speaker 2: So how do you get these products? Which are I
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Speaker 2: think some of them intended for sophisticated investors, right. I
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Speaker 2: can't get into a lot of private investments without meeting
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Speaker 2: certain criteria out to a retail investor like me.
17:43
Speaker 8: So there's different buckets in the US. From a regulatory
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Speaker 8: perspective about what you're able to invest in. I would
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Speaker 8: say our primary investor is going to be an accredited investor.
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Speaker 8: There's fourteen million of those that live here in America.
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Speaker 8: The definition of an accredited investor for those that don't know,
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Speaker 8: is if you're single, your two hundred thousand dollars. If
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Speaker 8: you're married or filing jointly, it's three hundred thousand dollars
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Speaker 8: fourteen million people like that. The next level are people
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Speaker 8: roughly thirty five million Americans who are looking to invest
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18:34
Speaker 1: Interesting. So what are the we were just talking a
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Speaker 1: little bit about private credit. Talk to us about kind
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Speaker 1: of your experience with private credit kind of and and
18:41
Speaker 1: for your clients as well, are they asking about private
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Speaker 1: credit that they want exposure there?
18:46
Speaker 8: I think you just hit on on a hot button.
18:48
Speaker 8: So you know, what I've seen is a major shift
18:51
Speaker 8: in investor demand over the last year and a half.
18:54
Speaker 8: If you think back to let's say January twenty two,
18:57
Speaker 8: we were in an incredibly sort of bull cycle at
19:00
Speaker 8: the time, if you will, and investors at large were
19:02
Speaker 8: looking for a great story. They wanted that next real
19:05
Speaker 8: estate opportunity they could own. They wanted that big private
19:07
Speaker 8: equity idea. They wanted that next big venture back company.
19:10
Speaker 8: What folks have shifted their appetite amidst all the volatility
19:13
Speaker 8: and increase in rates is a little bit less volatility,
19:17
Speaker 8: more consistency. They've asked for debt or debt like products
19:20
Speaker 8: that have consistent coupons and shorter duration. So the most
19:23
Speaker 8: popular things for us now are three to five years
19:26
Speaker 8: paying some type of a coupon, have a debt like
19:28
Speaker 8: product in so much as they have collateral that's really
19:31
Speaker 8: where people have shifted their appetite to. So practically what
19:35
Speaker 8: we've seen is real estate debt, art debt, private credit.
19:39
Speaker 8: So think of like supply chain finance, receivable funding, purchase
19:42
Speaker 8: order funding, so real credit like instruments.
19:45
Speaker 1: So how do you so, what would be a product
19:47
Speaker 1: if I want to in that supply chain thing, or
19:50
Speaker 1: if I want to art debt? What do you do
19:51
Speaker 1: for me? What's your platform do for me?
19:53
Speaker 8: So I think I think right now it might be available.
19:57
Speaker 8: I'm not sure, but you'd have to look. You'd have
19:59
Speaker 8: to look at the website. So for example, an art debt, right, So,
20:02
Speaker 8: we bought a business called Athena Fine Art from Carlisle
20:06
Speaker 8: in twenty nineteen. I think we paid roughly one hundred
20:08
Speaker 8: and seventy million dollars for it, and that is the
20:10
Speaker 8: sort of the pre eminent blue chip fine art lender
20:12
Speaker 8: in America. What the product will offer you is a
20:15
Speaker 8: diversified portfolio of loans that we've made to collectors or
20:19
Speaker 8: galleries or dealers who put up collateral of fine art.
20:23
Speaker 8: So call it five or ten million dollar pieces of art,
20:26
Speaker 8: We'll lend them forty or fifty percent loan to value
20:28
Speaker 8: we put it in one portfolio, so you get diversification,
20:31
Speaker 8: and we'll pay you ten percent per quarter for investing
20:34
Speaker 8: in that product. Okay, that's the art. For example, in
20:37
Speaker 8: our supply chain product, we have a product in supply
20:40
Speaker 8: chain where I think we've invested north of six hundred
20:42
Speaker 8: million dollars since we started that product. And what you
20:45
Speaker 8: will invest in is a six month supply chain offering.
20:49
Speaker 8: So you're investing in an opportunity to put up dollars today.
20:52
Speaker 8: As the product is delivered and paid forward by a
20:55
Speaker 8: company that's doing north of two billion in revenue in
20:57
Speaker 8: six months time, they will pay us back and we
21:00
Speaker 8: will make a we will make a payment to our investors.
21:02
Speaker 8: I believe that's eleven percent annually and pays in six months.
21:06
Speaker 8: So those are some ideas of how credit works in
21:10
Speaker 8: the real estate debt. It could be a one to
21:11
Speaker 8: two year bridge loan financing or a senior or a
21:14
Speaker 8: senior mortgage, and I can carry on sort of across
21:18
Speaker 8: the gamut. But those are legal.
21:20
Speaker 2: Legal finance is another thing that you do right, yes, indeed,
21:23
Speaker 2: So what does that mean? Like if you're someone wants
21:27
Speaker 2: to bring a big lawsuit against a defendant needs to
21:32
Speaker 2: fund that and then you take a cut of the winnings.
21:34
Speaker 8: So in legal finance there are different aspects of that
21:38
Speaker 8: industry across sort of the risk return gamut. So you
21:41
Speaker 8: have I would say, look, the safest part of the
21:43
Speaker 8: industry is a settled case financing, So somebody has achieved
21:47
Speaker 8: the settlement. The settlement is to be paid over a
21:48
Speaker 8: period of time. They want to access some capital earlier,
21:52
Speaker 8: so effectively you are buying a stream of cashuole in
21:54
Speaker 8: the future that's already been agreed upon and settled. The
21:57
Speaker 8: second bucket is what we would call law firm financing.
22:00
Speaker 8: So you have many law firms that only i would
22:03
Speaker 8: say practice on a success fee, and so their cash
22:05
Speaker 8: flow is very lumpy. But they may have a huge
22:07
Speaker 8: inventory of investments, but they want to be able to
22:11
Speaker 8: manage their cash flow needs, and so you will make
22:13
Speaker 8: a loan to the law firm, and as the law
22:15
Speaker 8: firm generates cash flow from its various cases, it will
22:18
Speaker 8: repay its investors. The next bucket is going to be
22:21
Speaker 8: more risky, whereas you can take an interest in if
22:24
Speaker 8: you will, alongside a plaintiff. So somebody may come and say, hey,
22:28
Speaker 8: we're going to pursue this corporation for doing something terrible,
22:32
Speaker 8: and we believe we have a case. We need some
22:35
Speaker 8: capital to be able to pursue that case or to
22:37
Speaker 8: be able to meet our sort of expenses on an
22:40
Speaker 8: ongoing basis. Would you like to share in the winnings
22:43
Speaker 8: with me? So there's different ways to invest in legal finance.
22:46
Speaker 8: Prior to starting yall Street, I was one of the
22:48
Speaker 8: sort of the preeminent players in legal finance dating back
22:50
Speaker 8: to two thousand and nine. So it's an assea class
22:52
Speaker 8: we know super well. It's an area that I think
22:54
Speaker 8: Yall Street has a tremendous amount of respect on the
22:56
Speaker 8: street and continues to invest actively in.
22:58
Speaker 2: But essentially, I mean the ten thousand foot views, you're
23:01
Speaker 2: looking at people that have ill liquid assets, that need
23:08
Speaker 2: access to cash, and so you're willing to put up
23:10
Speaker 2: some cash against some of their less liquid assets like
23:14
Speaker 2: five million dollar painting or legal fees that are coming
23:18
Speaker 2: in a lumpy way.
23:20
Speaker 8: I definitely think that's a part of the business. I
23:22
Speaker 8: think the macro perspective is thirty percent of your portfolio
23:26
Speaker 8: should be in alternative investments. People don't know how to
23:29
Speaker 8: access it or have an enjoyable way or simple way
23:32
Speaker 8: to access it. It is our duty to help you
23:34
Speaker 8: build a diversified portfolio. We work with the pre eminent
23:38
Speaker 8: managers across the street to partner with them and participate
23:41
Speaker 8: and make that available to you.
23:42
Speaker 1: That's a fascinating business. I'm glad we had you, and
23:44
Speaker 1: I didn't even know that stuff existed, so I learned
23:46
Speaker 1: something new on in finance. Michael White's founder and president
23:51
Speaker 1: of Yield Street is the name of the firm. Pretty
23:53
Speaker 1: cool business. You appreciate getting some of his time.
23:57
Speaker 5: You're listening to the team canjer Line program Bloomberg Markets
24:01
Speaker 5: weekdays at ten am Eastern on Bloomberg dot com, the
24:04
Speaker 5: iHeartRadio app and the Bloomberg Business app, or listen on
24:07
Speaker 5: demand wherever you get your podcast.
24:11
Speaker 1: Joining us in a studio. Right here's Bobby Gost He's
24:13
Speaker 1: the editor of a Bloomberg Opinion. Joined Bloomberg Opinion in
24:16
Speaker 1: twenty eighteen. I'm looking at his CB. Dude, you've been busy.
24:19
Speaker 1: You've been everywhere. Maybe can't hold a job off to
24:22
Speaker 1: talk about that later, but Bobby's been all over the
24:25
Speaker 1: place covering the global geopolitics, and we're so fortunate to
24:27
Speaker 1: get a couple of minutes of his time here in
24:29
Speaker 1: the Bloomberg Interactive Brokers studio. Bobby, I know you've written
24:32
Speaker 1: extensively on what's happening in Israel. What's your view.
24:36
Speaker 2: Kind of Well, let's start with what you think Hamas
24:39
Speaker 2: was intended to do, Like, what did they want with
24:42
Speaker 2: this brutal, horrendous terrorist attack Beyond spreading you know, hate
24:50
Speaker 2: and fear, what do you think they wanted to achieve?
24:53
Speaker 9: Well, they wanted to achieve a couple of things. First
24:56
Speaker 9: and foremost, they wanted to kill as many Israelis as
24:58
Speaker 9: they could, and they didn't whether there were civilians, children, women,
25:02
Speaker 9: grown men, soldiers didn't matter. They just wanted to kill
25:06
Speaker 9: as many people as they could, which is the basic
25:09
Speaker 9: modus operandi of any terrorist group. The second thing they
25:12
Speaker 9: wanted is they wanted to engage. They wanted to bring
25:15
Speaker 9: Israel into Gaza again, sort of bring the fight back
25:18
Speaker 9: into Gaza where lots of other civilians, now Palestinian civilians,
25:22
Speaker 9: would die. That also suits Hamas perfectly.
25:24
Speaker 2: Well, they don't their own people.
25:26
Speaker 9: Absolutely not. That's where they live. That's the whole idea
25:29
Speaker 9: of Hamas. They've always had this sort of apocalyptic view
25:33
Speaker 9: of the world. And also then you have some other
25:37
Speaker 9: political objectives. One is to end the rapprochma between Israel
25:44
Speaker 9: and Arab countries, specifically the deal that was very slowly
25:47
Speaker 9: developing between Israel and Saudi Arabia. Remember, Hamas also has
25:52
Speaker 9: answers to a master in Tehran, the Iranian regime, which
25:55
Speaker 9: pays their bills and which has supported Hamas for a
25:58
Speaker 9: couple of decades. Now this is part of the Iranian
26:01
Speaker 9: agenda as well, to keep them addle East in play,
26:03
Speaker 9: to keep things unstable, so that the eyes of the
26:07
Speaker 9: world are on these various other things when we are
26:09
Speaker 9: not paying attention to what's happening in Iran. So lots
26:12
Speaker 9: of different goals, some big, some small, some very local,
26:15
Speaker 9: some regional. So far, I'm sorry to say, Hamas seems
26:20
Speaker 9: to be achieving most of its goals.
26:22
Speaker 1: So now it's I guess the turn of Israel to respond,
26:26
Speaker 1: what do you think they should do? And what do
26:28
Speaker 1: you think they will do?
26:29
Speaker 8: They're gonna do exactly.
26:30
Speaker 1: What wants them to do, right, that's yeah.
26:33
Speaker 9: I mean, look, Natanya, who is damned if he does
26:36
Speaker 9: and he's damned if he doesn't. So as he has
26:40
Speaker 9: always done in his career, he'll be damned if he does.
26:43
Speaker 5: So.
26:44
Speaker 9: I suspect he will go in and go in in
26:46
Speaker 9: strength and try to disarm and decapitate Hamas. But we've
26:53
Speaker 9: learned this from the past that this is not that
26:56
Speaker 9: kind of a creature. This is not a traditional army,
26:58
Speaker 9: This is not even a tradition terrorist group. This is
27:01
Speaker 9: somewhere in between those two things. And so going in,
27:05
Speaker 9: guns blazing, bringing down entire neighborhoods, forcing a million Palestinians
27:11
Speaker 9: and Gaza to sort of head for the hills.
27:14
Speaker 5: So it was.
27:15
Speaker 9: These things don't really get to the objective that Israelis
27:21
Speaker 9: say they want, which is to completely destroy her mass.
27:25
Speaker 9: This is not that kind of creature. You can't completely
27:27
Speaker 9: destroy her mass because with every effort you make, you
27:31
Speaker 9: are potentially radicalizing young Palestinians who are today seeing their
27:36
Speaker 9: houses being blown down, who are seeing we're being forced
27:39
Speaker 9: to flee, who are seeing their entire population being denied water,
27:43
Speaker 9: denied electricity, all those things. So even as you kill
27:46
Speaker 9: a thousand Hermas soldiers, the risk is that a thousand
27:50
Speaker 9: new Hermas recruits are being born. Metaphorically speaking, even as we.
27:55
Speaker 2: Speak, what's the answer here, to limit civilian deaths, especially
28:01
Speaker 2: of women and children, is their way to let them
28:05
Speaker 2: out of Gaza.
28:07
Speaker 1: And I know you want to.
28:08
Speaker 2: Avoid taking all the Palestinians out of Gaza, right because that's.
28:13
Speaker 9: The soldiers will go in that But we also have
28:17
Speaker 9: to start with the reckoning that not everybody wants to leave.
28:20
Speaker 9: Quite a lot of people in Palestine don't in Gaza
28:22
Speaker 9: don't want to leave because they're terrified that they won't
28:24
Speaker 9: be allowed back. For good reason that you know, many
28:27
Speaker 9: of the majority of people who live in Gaza are
28:31
Speaker 9: children and grandchildren of former refugees who were who fled
28:35
Speaker 9: to Gaza from other places in Israel and never got
28:37
Speaker 9: to go back to their homes. And so the people
28:40
Speaker 9: in Gaza live in fear that if they leave now,
28:42
Speaker 9: they will not be allowed back. But at the same time,
28:46
Speaker 9: as the bombs come down, as their houses collapse, they
28:48
Speaker 9: want they want their families to be safe. So there
28:50
Speaker 9: will be a proportion of people who at least want
28:53
Speaker 9: to get their children out. The question the trouble is
28:58
Speaker 9: where can nobody want That's the tragedy of Gaza. They
29:03
Speaker 9: have to deal with Hamas on one side, Israel on
29:07
Speaker 9: the other side. They've got no place to go. None
29:10
Speaker 9: of the other Arab countries want them because Indians. They
29:13
Speaker 9: don't want the Palestinians because for two reasons. One is
29:16
Speaker 9: they say, look, the Egyptians say this, first and foremost,
29:19
Speaker 9: you bring hundreds of thousands of Palestinians into Egypt. That
29:22
Speaker 9: creates a security problem for Egypt. The second thing they
29:26
Speaker 9: say is that, look, you bring these people out of Palestine,
29:30
Speaker 9: you're letting Israel off the hook, out of sight, out
29:33
Speaker 9: of mind. Once the Palaestinians have left Palestine, then Israel
29:36
Speaker 9: doesn't face any pressure to solve the problem. And then
29:40
Speaker 9: there's the sort of cold reality, which is that these
29:43
Speaker 9: countries simply don't want the headache of having to deal
29:46
Speaker 9: with hundreds of thousands of Palestinians in their.
29:50
Speaker 1: Midst Here's my naive question of the day. To what
29:53
Speaker 1: extent does Hamas enjoy the support of the Palestinian people
29:58
Speaker 1: in Gaza? Questions I asked much.
30:01
Speaker 9: That's a good question.
30:02
Speaker 1: Why don't they Why don't they force Hamas out somehow?
30:07
Speaker 1: I don't. I don't know.
30:08
Speaker 9: It's it's a question that I've asked myself a thousand times.
30:11
Speaker 9: When I used to go to Gaza. The thing is
30:14
Speaker 9: that Hamas has the guns. Ordinary citizens can't really afford
30:19
Speaker 9: to rise up against Hamas because they've got again, they've
30:23
Speaker 9: got no place to run. There's nobody backing them. Right
30:26
Speaker 9: in other situations like this, why you have an armed
30:30
Speaker 9: group subjugating the populace. The populace has or can at
30:36
Speaker 9: least hope that somebody else will support them if they
30:38
Speaker 9: rise up. Who's going to help the Palestinians if they
30:41
Speaker 9: rise up?
30:41
Speaker 1: Will it be there any entities?
30:44
Speaker 9: Right now? The PLA is now long past it's revolutionary credentials.
30:49
Speaker 9: It's a deeply corrupt, inept organizations. It's been right. They've
30:53
Speaker 9: had no elections in sort of two decades. They're being
30:57
Speaker 9: run by a gerontocracy of deeply corrupt and inept individuals.
31:01
Speaker 9: So the PLA is out. It took them nearly a
31:04
Speaker 9: week to come up with a statement to say Hamas
31:06
Speaker 9: doesn't represent the Palestinian people. This should have been their
31:10
Speaker 9: statement within minutes of the first news breaking, It took
31:12
Speaker 9: them a week. That gives you a sense of how
31:14
Speaker 9: useless their political leaders are. So they are really the
31:19
Speaker 9: people of Gaza are really caught in a bad place.
31:22
Speaker 9: We can never really know. There's plenty of anecdotal evidence
31:26
Speaker 9: that they don't like Hamas. Whenever they've had an opportunity
31:29
Speaker 9: to express that, that's the expression that.
31:31
Speaker 2: They've given the Palestinian people in Gaza, particularly because I've.
31:35
Speaker 1: Heard conflicting reports.
31:36
Speaker 2: Some people say, you know, of course, very few of
31:38
Speaker 2: them support Hamas than others say.
31:41
Speaker 1: People I've talked to.
31:42
Speaker 2: Last week say fifty percent of them like Hamas and
31:45
Speaker 2: the others want someone a little bit more extreme than Hamas.
31:48
Speaker 9: No, I wouldn't go that far. These are people who've
31:50
Speaker 9: lived through the consequences of Hamas running their little enclave,
31:55
Speaker 9: and they know what damage that has done. I'm forgive me.
32:00
Speaker 9: Everybody I've ever talked to has said, we would like
32:04
Speaker 9: not to have to depend on Hamas, but we've got
32:06
Speaker 9: nothing else. We can never know because you can't hold
32:09
Speaker 9: a pole. You can't hold an opinion poll in a
32:11
Speaker 9: place like that with the Hamas guns around you. It's
32:13
Speaker 9: like trying to hold it. How many people support Putin
32:15
Speaker 9: in Russia? Right, We can never know. How many people
32:18
Speaker 9: support the Castros in Cuba. We can never know because
32:21
Speaker 9: people are not allowed to express themselves freely.
32:24
Speaker 1: Do do you expect this to get really bad, to
32:27
Speaker 1: widen out where Iran is involved. Is that something that
32:31
Speaker 1: is a reasonable risk here that we need to be
32:33
Speaker 1: I mean, I see the US sending a second carrier
32:36
Speaker 1: group in there, which to me tells me that the
32:38
Speaker 1: US is does have a valid concern about Iran.
32:42
Speaker 9: Well, if we have, we should be concerned about Iran.
32:46
Speaker 9: But I can't see the Ruanians themselves get involved. The
32:50
Speaker 9: Iranian modus operandi with Israel has always been they will
32:52
Speaker 9: fight to the last Arab. They don't want their blood
32:55
Speaker 9: on the line, they don't want their people and their
32:58
Speaker 9: regime at risk, happy to fight using other people as
33:02
Speaker 9: they can and fodder, which is what Hamas is. But
33:06
Speaker 9: they do have other proxies has Belah, most prominently the
33:10
Speaker 9: Chiai militias in Iraq, the Hutis and Yemen. They've got
33:14
Speaker 9: the sort of a number of catspaws, these little proxy
33:18
Speaker 9: armies that they have supplied and trained and paid for
33:21
Speaker 9: for decades. And that's what is the main concern. If
33:25
Speaker 9: Hezbullah gets in.
33:27
Speaker 2: Why does the Arab world allow them to have so
33:30
Speaker 2: many proxies?
33:31
Speaker 8: I mean, why.
33:33
Speaker 2: Don't Saudi Arabia and Egypt. You know, Jordan, get together
33:39
Speaker 2: and say no more of this Iranian outreach.
33:42
Speaker 9: Because they're not led very well. They're not led by
33:44
Speaker 9: by they're not open free societies, they're not elected representative leaders.
33:51
Speaker 9: These are monarchies or dictatorships. They're highly corrupt and highly
33:55
Speaker 9: not I mean the Saudi army. Take this out the
33:58
Speaker 9: army for example, this is one of the if you
34:00
Speaker 9: looked at just their hardware, they've been buying American best
34:03
Speaker 9: of American military hardware forever, right. They pay top dollars.
34:07
Speaker 9: They've got no shortage of money, and they buy the best,
34:10
Speaker 9: shiniest weapons. And they got there. They got trashed by
34:15
Speaker 9: these hoo thies in Yemen who are basically operating on
34:21
Speaker 9: early twentieth century military strategies and sort of maybe late
34:25
Speaker 9: twentieth century hardware. They got beaten to a pulp. These armies,
34:30
Speaker 9: most of these Arab armies, are designed to protect the
34:33
Speaker 9: regime from their own people. These armies are good at
34:37
Speaker 9: beating up unarmed pro democracy protesters. They're no good at
34:41
Speaker 9: actually fighting any wars, which is why they depend on
34:45
Speaker 9: the American security umbrella, which is why they're not capable
34:48
Speaker 9: of securing themselves.
34:50
Speaker 1: Bobby, Thanks, so much for journeys. Really appreciate it. I
34:52
Speaker 1: really try to read your stuff. Now. I'm going to
34:53
Speaker 1: set up an alert because mentioned we had to set
34:55
Speaker 1: up alert so I never miss any of your stuff.
34:56
Speaker 1: Bobby Goes, he's the editor for Bloomberg Companion. We really
34:59
Speaker 1: appreciate getting a few minutes of his time as we
35:01
Speaker 1: try to figure out kind of what's I mean. We
35:03
Speaker 1: could talk to Bobby for an hour.
35:04
Speaker 5: I know you're listening to the tape. Can's our live
35:07
Speaker 5: program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,
35:12
Speaker 5: the tune in app, Bloomberg dot Com, and the Bloomberg
35:14
Speaker 5: Business App. You can also listen live on Amazon Alexa
35:17
Speaker 5: from our flagship New York station, just say Alexa playing
35:21
Speaker 5: Bloomberg eleven thirty.
35:24
Speaker 1: Let's talk about the ipo market. You're just talking earlier
35:26
Speaker 1: about Birkenstock. That was the latest of a number of
35:29
Speaker 1: IPOs that we've seen since kind of that Labor Day weekend.
35:32
Speaker 1: We had a bunch of them kind of teed up.
35:34
Speaker 1: Birkenstock's trading up four percent today, but it is below
35:37
Speaker 1: its ipo price. The question is, is this mark a
35:40
Speaker 1: little bit of a beginning of reawakening of the IPO market.
35:44
Speaker 1: Let's check in with our next guest. I think she
35:46
Speaker 1: may have an opinion here. Katie Penny joins us. She
35:48
Speaker 1: said of corporate transaction practice at Cross Country Consulting. She
35:53
Speaker 1: joins us via zoom. Katie, thanks so much for joining
35:55
Speaker 1: us here. We had a little open window there in
35:59
Speaker 1: the IPO market right after Labor Day. Seems people were
36:01
Speaker 1: getting back to work, getting off the beach. Talk to
36:03
Speaker 1: us about kind of the IPO market today is at
36:05
Speaker 1: the beginning of maybe a wider opening of this window
36:10
Speaker 1: or not.
36:12
Speaker 4: Yeah, thanks Paul and Matt for having me. You know,
36:15
Speaker 4: certainly post Labor Day with arm and Instacart and the
36:20
Speaker 4: most recent Birkenstock all coming out into the market, certainly
36:25
Speaker 4: attracting attention as it relates to the IPO markets. But
36:30
Speaker 4: I think in general what we have seen is with
36:34
Speaker 4: the market volatility and the after market performance from each
36:40
Speaker 4: of those that I specifically named, but others as well,
36:43
Speaker 4: that in that net decline position. I think again there
36:48
Speaker 4: likely could be some delays that are coming through as
36:51
Speaker 4: it relates to those that might be considering going public.
36:54
Speaker 4: I mean, Birkenstock is a strong brand, profitable company, steady
37:00
Speaker 4: consumer base, and it is early, but with price declines
37:05
Speaker 4: after their market debut, I think this may delay some
37:08
Speaker 4: other companies that maybe considering an IPO debut right now.
37:12
Speaker 2: Is I wonder if the problem with IPOs is that
37:17
Speaker 2: the market environment is no good for them, or that
37:21
Speaker 2: companies don't necessarily need to come to market the way
37:25
Speaker 2: they previously did for their exits.
37:28
Speaker 8: What do you think?
37:30
Speaker 4: Yeah, I think the market environment certainly is not in
37:33
Speaker 4: their favor. I mean, if we reflect back, we know
37:36
Speaker 4: twenty two was certainly a stagnant year, but looking back
37:40
Speaker 4: to twenty one when IPOs were at their ultimate high,
37:44
Speaker 4: thinking about that strong and steady flow at that point,
37:47
Speaker 4: you know, what were market conditions then, and consumers and
37:51
Speaker 4: companies were coming out of hibernation so to speak, post pandemic.
37:56
Speaker 4: Interest rates were low, financing was inexpensetive, consumer spending was up.
38:03
Speaker 4: We know, valuations were high, and there was a lot
38:06
Speaker 4: of focus on growth strategy, all of those influencing the
38:10
Speaker 4: IPO markets. But if we take a look today, those
38:14
Speaker 4: same conditions don't exist. We know interest rates are high,
38:19
Speaker 4: and you were talking about that on one of your
38:20
Speaker 4: earlier segments, the possibility of another rate increase, and this
38:25
Speaker 4: concept of staying higher for longer certainly drives the cost
38:29
Speaker 4: of capital to be expensive. There has been some discussion,
38:35
Speaker 4: I know, around the pandemic savings coming to an end,
38:38
Speaker 4: student loan payments, all coming back the geopolitical certainly as
38:44
Speaker 4: it relates to Ukraine, and as I noticed on your
38:46
Speaker 4: prior segment, the devastation and conflict in Israel, all of
38:50
Speaker 4: those factors really being fluid and compounding and really I
38:55
Speaker 4: think having some negative impact as it relates to those
38:58
Speaker 4: that are considering coming into market through an IPO. So
39:02
Speaker 4: some really tough market dynamics right now.
39:04
Speaker 1: Hey, Katie, Back when I was doing these IPOs for business,
39:09
Speaker 1: we never used these anchor investors. My anchor investor was
39:14
Speaker 1: always Fidelity. I mean he was tooking twice the allocation
39:16
Speaker 1: of the next highest of the number two offering. That
39:21
Speaker 1: was kind of my anchor. But talk to us about
39:23
Speaker 1: that anchor investor kind of thing. It seems to become
39:25
Speaker 1: a little bit of a strategy here.
39:28
Speaker 4: Yeah, I would say some companies, and this is somewhat
39:31
Speaker 4: more more recent. So same as I look over my
39:34
Speaker 4: career as well, it wasn't often to have these anchor
39:38
Speaker 4: investors or cornerstones. But some companies with the strategy of
39:42
Speaker 4: looking to potentially de risk their IPO through this way,
39:46
Speaker 4: so more or less talking with investors early, using a
39:51
Speaker 4: strategy to identify these anchor investors or cornerstones, really with
39:56
Speaker 4: the idea to more or less attempt to demonstratevalidation and
40:01
Speaker 4: confidence in their offering.
40:04
Speaker 1: I don't know. I kind of when I first saw that,
40:06
Speaker 1: I said, this is a deal that needs an anchor,
40:10
Speaker 1: maybe can't stand on its own. That was my view.
40:14
Speaker 1: I don't know, but I guess this seems to be
40:16
Speaker 1: a little bit more accepted in the IPO marketplace. I
40:18
Speaker 1: was wondering if that's just reflection something that seems to
40:20
Speaker 1: have carried.
40:21
Speaker 2: Over from spack investments.
40:23
Speaker 1: Maybe, you know, maybe. So, how's the pipeline look, Katie,
40:27
Speaker 1: as you look towards the remainder of the year.
40:31
Speaker 4: Yeah, I think as far as looking out that more
40:35
Speaker 4: or less given some of the challenges that we just mentioned,
40:38
Speaker 4: it's really creating dynamics for the IPO market and again
40:42
Speaker 4: reflecting on some of these that as we talk about
40:44
Speaker 4: come out post Labor Day there after, market overall kind
40:48
Speaker 4: of net decline. I'm not expecting to see a significant
40:51
Speaker 4: uptick in IP as for the remainder of twenty twenty four. Certainly,
40:56
Speaker 4: maybe if some of these challenges begin to subside, or
41:00
Speaker 4: again we tend to move things to think of them
41:03
Speaker 4: as normalcy, then there may be more periods for entry
41:07
Speaker 4: as we head into the first half of twenty four
41:10
Speaker 4: before the electioneers that again might narrow the window a bit.
41:14
Speaker 4: So I think it'll again through the rest of this year.
41:18
Speaker 4: I'm not expecting it a significant uptick, all right.
41:21
Speaker 1: I don't know. If I had the S and P
41:22
Speaker 1: up fifteen percent, I could get some companies through. I
41:24
Speaker 1: don't know what these kids are doing today. Katie Penny,
41:27
Speaker 1: thanks so much for joining as head of corporate Transaction
41:29
Speaker 1: Practice at Cross Country Consulting. I mean, the deal's coming
41:33
Speaker 1: out after the Liberty they all look like good companies,
41:36
Speaker 1: you know, and they really Yeah, I thought they were.
41:39
Speaker 2: I mean, there were a couple of companies I still
41:40
Speaker 2: don't know exactly what they were doing.
41:42
Speaker 1: I thought they were. I thought they were. I mean,
41:44
Speaker 1: you know, ARM is a chip company. I don't know
41:46
Speaker 1: that kind of felt like there were some solid companies,
41:48
Speaker 1: solid track.
41:49
Speaker 2: I get ARM for sure, Instacart two Kava, I get that. Yeah,
41:55
Speaker 2: Burgenstock for sure.
41:56
Speaker 8: Yeah.
41:56
Speaker 1: So I mean I thought they were real companies, real
41:58
Speaker 1: real businesses, real cash flows spread. They haven't trade a
42:00
Speaker 1: little bit better, but we'll have to see.
42:02
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42:05
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42:09
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42:12
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42:15
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42:18
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42:21
Speaker 1: Well, we're right in the midst of a lot of
42:23
Speaker 1: the big banks reporting earnings, and obviously one of the
42:27
Speaker 1: key topics it's just the advances in financial technology, how
42:31
Speaker 1: they're trying to capitalize on that, how it represents fintech
42:35
Speaker 1: represents perhaps a competitive threat. So we want to dive
42:37
Speaker 1: a little deeper into that. Brian Hindeman he joins us.
42:40
Speaker 1: He's the CEO of Blue Ocean Technologies. He joins us
42:43
Speaker 1: via zoom Brian, thanks so much for joining us here.
42:45
Speaker 1: Let's just take the thirty thousand foot view here talk
42:48
Speaker 1: to us about Blue Ocean Technologies. What do you guys,
42:52
Speaker 1: how do you guys play in this fintech space?
42:54
Speaker 10: Yeah, well thanks for having me so very simply, Blue
42:57
Speaker 10: Ocean Technologies, we have an ATS, a alternative trading system.
43:02
Speaker 10: We trade US stocks National Market system stocks when the
43:05
Speaker 10: traditional exchanges are closed. So starting at eight o'clock PM
43:10
Speaker 10: Eastern Time to four o'clock in the morning, we'll trade
43:13
Speaker 10: the most active National Market System US stocks during that
43:19
Speaker 10: eight hour period on any given night. During the month
43:24
Speaker 10: of September, we traded over four thousand different stocks on
43:27
Speaker 10: any given night during the month.
43:29
Speaker 1: So are you a market maker? Are you an agent?
43:33
Speaker 1: Just putting together buyers and sellers?
43:34
Speaker 7: Here?
43:34
Speaker 1: Do you make a market? How does that work?
43:37
Speaker 10: So we have market makers on the platform like Chain
43:39
Speaker 10: Street and Virtuo that provide two sided liquidity. In these names,
43:44
Speaker 10: we act like an alternative trading system or a very
43:47
Speaker 10: exchange like just like Nasdaq. We match buyers and sellers
43:51
Speaker 10: and don't take any principal position.
43:53
Speaker 1: And so your is your commission? Straight up commission? Is
43:56
Speaker 1: that how your business model works?
43:59
Speaker 5: Yeah?
43:59
Speaker 10: I mean basic as we call it, a maker taker fee.
44:03
Speaker 10: We give a rebate to people that provide liquidity on
44:06
Speaker 10: the platform. And we charge a take fee when someone
44:10
Speaker 10: is hitting a bit or lifting an offer and removing liquidity.
44:13
Speaker 10: And we also charge for market data. So there's two
44:15
Speaker 10: revenue streams for the ATS.
44:17
Speaker 1: So who are your customers? Who's trading here? Is that
44:20
Speaker 1: individual is a retail as institutional?
44:23
Speaker 10: Yeah, so primarily we only interface with finner registered broker dealers, right, so,
44:28
Speaker 10: if you're a retail customer, you have to come through
44:31
Speaker 10: your brokerage account like Robinhood or interactive brokers who are
44:35
Speaker 10: currently connected to the platform.
44:37
Speaker 7: Right.
44:37
Speaker 10: So, right now, I would say it's ninety five to
44:39
Speaker 10: almost one hundred percent retail, both here in the States,
44:44
Speaker 10: but more importantly retail coming from the Asia pac region.
44:48
Speaker 10: Those folks over there want to trade US stocks during
44:51
Speaker 10: their daytime hours.
44:53
Speaker 1: So what's kind of an average transaction size for you
44:56
Speaker 1: and shares and dollars?
44:58
Speaker 10: Yeah, so the average share size and we charge on
45:02
Speaker 10: a per share basis, it's somewhere between one hundred and
45:04
Speaker 10: fifty and two hundred shares on any given.
45:06
Speaker 1: Night, per per transaction, per transaction, I got you. So,
45:11
Speaker 1: so where are we in terms of like, you know,
45:14
Speaker 1: one of the things I've you know, learned about crypto,
45:18
Speaker 1: particularly bitcoin. And what's so unusual is it trades all
45:21
Speaker 1: the time, twenty four hours a day, seven days a week.
45:25
Speaker 1: And so you kind of you leave work on Friday
45:27
Speaker 1: and you look at bitcoin. You remember it was trading
45:29
Speaker 1: at like, you know, twenty four thousand. You come in
45:31
Speaker 1: on Monday and it's twenty eight thousand, Like what Then
45:34
Speaker 1: You're like, oh, yeah, they trades over the weekend. Are
45:36
Speaker 1: we ever going to get to that kind of trading
45:39
Speaker 1: for equities?
45:41
Speaker 10: I think we are, and really because of you know,
45:44
Speaker 10: the way crypto trades. I think US equities are now
45:46
Speaker 10: trading twenty four by five. So years ago, when I
45:50
Speaker 10: was at NASDAK running the NASDAK platform, we wanted to
45:53
Speaker 10: go ahead and trade twenty four hours, but customers just
45:57
Speaker 10: they weren't prepared a from a call it support for respected.
46:00
Speaker 10: They didn't have the desk or the infrastructure to support
46:03
Speaker 10: twenty four hour trading. But now that crypto, as you said,
46:07
Speaker 10: trades twenty four by seven, right, futures even some options
46:13
Speaker 10: trade twenty three, twenty four hours a day. The infrastructure
46:16
Speaker 10: is in place now to trade twenty four by five.
46:19
Speaker 10: We start trading on Sunday night at eight pm, and
46:22
Speaker 10: we wrap up on Thursday, well really Friday at four
46:27
Speaker 10: in the morning. Right now, because of anything clearance and settlement,
46:32
Speaker 10: we're not really prepared as an industry to trade seven
46:35
Speaker 10: days a week. But right now US equities are trading
46:38
Speaker 10: twenty four by five.
46:40
Speaker 1: Interesting, all right, So talk to just about your customers.
46:43
Speaker 1: You mentioned Asia, So do you have any I mean,
46:46
Speaker 1: how do you get customers in Asia? How does that
46:48
Speaker 1: kind of all work? Did you work with maybe the
46:50
Speaker 1: Tokyo Stock Exchange or how does that work?
46:52
Speaker 10: Yeah, So, a couple of ways that customers can come in.
46:54
Speaker 10: If thera fit or registered broke a dealer like many
46:57
Speaker 10: of them over in Asia, are they have a US ARM,
47:00
Speaker 10: they can come in directly and interfaced with Blue Ocean directly,
47:04
Speaker 10: or they can come in sponsored access. So we have
47:06
Speaker 10: some firms that they're finner registered broken dealers. We interface
47:10
Speaker 10: with them and then they onboard the Asian brokers to
47:14
Speaker 10: interface with them.
47:15
Speaker 4: Right.
47:15
Speaker 10: But then as you mentioned, we also recently did a
47:18
Speaker 10: deal with the Tokyo Stock Exchange. The Tokyo Stock Exchange
47:22
Speaker 10: took a five percent stak in Blue Ocean Technologies. They
47:26
Speaker 10: have eighty two brokers that trade on their exchange that
47:29
Speaker 10: will now have access to become subscribers of Blue Ocean,
47:33
Speaker 10: either directly or in a sponsored access fashion like I
47:36
Speaker 10: previously mentioned.
47:38
Speaker 1: Interesting, how about some of the retail brokers here, like Robinhood.
47:43
Speaker 1: I mean, robin Hood's has gotten so big so quickly,
47:46
Speaker 1: and I'm guessing there's some demand from those customers.
47:50
Speaker 10: Yeah, so Robinhood is a great example robin Hood Interactive brokers.
47:54
Speaker 10: US clients want to trade at a time that's more
47:58
Speaker 10: convenience when they get home from work. The exchanges could
48:01
Speaker 10: be closed on the West Coast even after hours. Trading
48:04
Speaker 10: closes at five o'clock on the exchanges. So robin Hood
48:08
Speaker 10: offers in the US to trade on Blue Ocean twenty
48:13
Speaker 10: four by five. But robin Hood's also expanding to the
48:17
Speaker 10: European markets also, firms like Interactive Brokers, they have a
48:21
Speaker 10: very large presence at in the Asia market and they
48:23
Speaker 10: get US customers and they also get Asia customers trading
48:26
Speaker 10: on Blue Ocean.
48:28
Speaker 1: So I mean, are you seeing an expansion either or
48:33
Speaker 1: maybe just kind of talks about you mentioned one hundred
48:35
Speaker 1: and fifty to or two hundred shares. Do you expect
48:37
Speaker 1: that to grow? Do you expect more stocks to be traded.
48:42
Speaker 1: How do you expect the fighter If.
48:44
Speaker 10: I look at the growth this year, We've grown almost
48:46
Speaker 10: twenty times since December of twenty twenty two last year.
48:52
Speaker 10: So there's been a real upward trajectory on the number
48:57
Speaker 10: of stocks that we trade on any given night. Like
48:59
Speaker 10: I said, during the month that's Tember, close to four
49:01
Speaker 10: thousand different names which traded, the number of brokers that
49:04
Speaker 10: are connected, retail customers coming in directly we sponsored access,
49:09
Speaker 10: and the amount of shares on any given night. We're
49:11
Speaker 10: close to thirty million shares on any given night where
49:14
Speaker 10: we finished last year called it a half a million
49:17
Speaker 10: shares per night.
49:18
Speaker 1: Where do you think that thirty million goes? Maybe over
49:21
Speaker 1: the next year.
49:21
Speaker 10: So yeah, I think if I wanted to make some
49:24
Speaker 10: forward looking statements, I would say that, you know, we
49:27
Speaker 10: certainly can double that up. I think certainly get to
49:30
Speaker 10: the sixty to ninety one hundred million over the course
49:32
Speaker 10: of the next call it twelve to eighteen months.
49:35
Speaker 1: So your company, Blue Ocean, what's the ownership of that company?
49:40
Speaker 7: So?
49:40
Speaker 10: Blue Ocean is owned by a variety of partners. Obviously
49:46
Speaker 10: I mentioned the Tokyo Stock Exchange. Our largest investor is
49:50
Speaker 10: Urbana Corporation. Urbana Corporation is a publicly traded company north
49:55
Speaker 10: of the border Canadian company. They own, you know, in
49:58
Speaker 10: excess of thirty five percent and a Blue Ocean.
50:01
Speaker 1: Interesting, all right, really fascinating story. Brian Hindeman, he is
50:04
Speaker 1: the CEO of Blue Ocean Technologies, talking about the trading
50:09
Speaker 1: outside of market ours electronic trading, and question is whether
50:13
Speaker 1: there every twenty four hour trading trend in equities truly,
50:18
Speaker 1: you know, something like that. You have seven days a week,
50:19
Speaker 1: so it's really interesting part of the trading dynamic.
50:24
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50:27
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50:31
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50:33
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50:34
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50:37
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50:40
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50:43
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