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