Why Massive Growth In Private Markets Will Continue

uh and Casper, among others. But the real question is why even go public when the private market is becoming more in robust, both on the initial financing side of things as well as a trading side. Joining us now Kelly Rodriguez, chief executive officer of Forge, which helps facilitate some of that trading and activity in private markets before companies go public, or for companies who may never go public. Kelly, thank you so much for being here with us in

our interactive broker studios. Can we just get started? You know why a company would want to go public at this point given what you're seeing in private markets. I think at at this point, with all of the access to liquidity that you see for a private company, the reason to go is that you've matured to the point that you want to let a retail investor around the world get access to your stock. But from the standpoint of just access to liquidity in general, there isn't a reason.

So what we saw in twenty nineteen enter nineteen is boy a lot of anticipation about a lot of big unicorn and deals coming public, opportunity for investors investor really cool transformative companies like uber like Lift, like we Work. It didn't work out well for the public investors in What do you think happened for some of those big marquee deals that just didn't trade well on the public markets.

A couple of things. The data that we have showed that historically, if you were going to come into an I p O as an investor, twenty nineteen was a year that marked you should have gotten in six to eighteen months before. And if you look at where these deals priced in twenty nineteen UM, we could see from the private market demand the bid ask uh that they're

probably going to be pretty flat. I also think there was a there's a path to profitability question that's now central to all of these unicorns is sort of raises a key point, right. Has the dynamism in the US equity market moved from public to private? And and that's sort of implicit in what you're saying. Basically, the idea of being the real gains are to be had before the vast majority of people can get access to these companies. Is that changing? Is there better access? Yeah? I think this,

This is what we're at Forge all about. And I think what we're trying to do is address the regulatory issues and the access issues for people to participate in the private markets, because look, this has been an asset class. It's been performing for twenty years. It's just most people can't get into it. Uh, and so that is shifting, all right. So of the four plus unicorns out there roughly that are still in the private markets, if I want to, how many of those companies can I, in

theory buy into and as private? Yes, in theory you can get into all of them right now? Are our data suggests that of them are investable today? Okay? So I but I come to you or I go through I mean, how do how do how would I actually do that? That That I have to be an institutional investor? Can I can an your retail investor do this? This is really the emergence of the private markets at a at a broad level in the world. This is what

Forge serves. Were there to help companies get access to that liquidity and help investors get access to those companies. So that's our central purpose. Outside of US, you'd have to go through a venture capital firm, become an LP, or find a way to directly contact the company. That's tough.

And actually, when some of these I p o s didn't do so hot last year, one thing that was notable was you dig onto the hood of a lot of mutual funds and you actually find that mutual funds own a lot of those shares, particularly the later rounds of financing. But it does raise a question, Kelly. The idea here that private markets are becoming as liquid as public markets. They're becoming sort of dominated by companies of similar size to what you can find in public markets.

What is the difference at this point between private and public equity markets. The most significant difference that we see is the way a company operates when they're private. The continue to invest and not have a quarter over quarter mentality.

There's a strategic reason why that's valuable, and it's there's a reason why these companies are staying private for twelve, thirteen, fourteen years to get market dominance before they actually go out in price and start operating under that quarter over quarter basis. Another interesting development in the equity capital markets in twenty nineteen, at least to me, was direct public listings. Could you kind of help us understand what those are and are we can see more of them? Yeah, I

think it's a huge trend. UM. The New York Stock Exchanges, as you have reported, is currently pushing to allow companies to raise capital these direct listings. We think they're amazingly efficient UM, and they really allow investors to come into deals UM on a market based pricing basis, meaning there isn't a cover price. They're really in the two that have been out there, we've done significant business around both Slack and Spotify, and you saw investors start to come

in days before and write it through for the company itself. UM. It allows them to raise money, UM, not through this small group of investors who have been brought by an investment bank, but really to provide access broadly. The one concern that people have are one of the main concerns is that there is severe misvaluation going on in private markets, and we work as sort of heralded as the example

of that. Do you think that that is accurate? I think it's becoming um more coming off from we we work. I think the focus of valuations really that's the theme of how twenty nineteen ended, and so I'd say that there have been a lot of valuation news in twenty nineteen, really on a couple of the big investors, soft Bank being one. I think when you see a broader group of people coming into these companies, you're gonna see pricing settled down. Kelly Rodriguez, thanks so much for joining us.

Kelly Rodriguez is the chief executive officer of Forged, based in San Francisco, but joining us here in our Bloomberg Interactive Broker studio really fascinating part of the equity capital

markets in twenty nineteen. You know, we're some of those big unicorn deals that did not trade well and maybe how that changed how investors are looking at some of these coming I think the key debate post crisis has been the evolution of private markets and how that has become increasingly dominant for a source of funding for companies

of all sizes, not just the very smallest ones. And it really raises a question of some of the flaws in public markets, uh and where private markets are are sort of benefiting the public markets need to need to take on. Yeah, and we're seeing you know, we saw with Uburn Lift Company staying private longer because there is much capital. Let me know that consumers have really been the backbone of economic growth in the United States, and we got some data today that showed that the consumers

still doing well. We are consumer retail sales today came in pretty strong for the month of December, indicating once again that the consumer continues to spend. It help us breakdown what's going on in all things retail. We welcome our good friend, uh Bert Flickinger, Managing director, Strategic Resource Resource Group, joining us here and I blew our interactive broker stat Studio. Bert, thanks so much for joining us. We did get those retail sales numbers today. What kind

of stood out for you? What really stood out and and Lisa and Tom talked about it so well at the open, is that auto sales down shifted a little bit, and we're seeing the auto manufacturers charge real price premiums and actually making smaller cars, so the consumers uh won't pay more for less. And at the same time, on the Bloomberg terminal, you look at auto loans and auto

credit is an all time high. So with consumers spending less on auto, they're spending they're spending more in restaurants and spending more on the rest of retail um importantly, what Lisa pointed out earlier, not on luxury. Well, so here's what I'm Here's what I'm struggling to understand. Its consumers are spending more in retail and clothes and stuff like that. And then it Coal's J. C. Penny even target disappointed the holiday of forecasts. How do we swear

those two things? Lisa, this is a really important insight you're bringing up. And and the real idiosyncracy institutionally is how can the Bonti group of six different department stores to Barney's New York Liquid Aid and these retailers you're referencing aren't targeting those lost shoppers who are loyal to the other retailers from Herberts to Carson's to Barney's and

shift them over the stores. The other thing we're seeing is the vendors are actually actually doing in some of the stores that some of the brand vendors are trying to get the shoppers to buy direct online from the brand instead of going to the store. So they're under allocating the inventory to the stores, and the stores are cutting working capital and don't don't have enough inventory in the stores themselves. How do you get the Bonton customer

the Barneys customer two very different customers. Meanwhile, but how do you attract them? So, say, say with Shields and in Grand Forks, North Dakota, would part of our retail route is um go to the Shields customers and cross merchandise for the customer lists for the herburgers who are

on the other side of the same shopping center. And then there's so many good means through uh am its on, uh analytics, Facebook analytics, survey monk key to find where shoppers shopped and then offer them UH discounts and coupons to convert them and all generations of their family UH from babies to pets, pet products to stuff for seniors. Just probably what if you could just clarify for me because I thought I had to handle on holiday sales

that they are up three four pretty good. But then again, at least I was mentioned, we've had some retailers posts some of the holiday numbers that don't necessarily align with that. So was it is it? Clearly? Is it a game of winners and losers? It's not all retailers are lifting. It's it's just your reference, Paul. It's it's winners and losers. It's also leaders that in many of these retailers, you have a male monarchy of people who are nbas and came from hedge funds and didn't come up from the

shop floors. So they're not promoting the best and the brightest women. And some of those retailers are really struggling from having older Caucasian guys that spend more time with the Wall Street analysts and they spend with their people in their own stores. So you can blame issues with with a lack of diversity in the C suite or

what have you. I think that the sort of question that I have is there is this fundamental shift from the brick and mortar to online, and how much do you invest in the experience of going into brick and mortar versus invest in your online outfits to compete with Amazon, Lisa, the experience you're referencing is essential. So there's a lost

magic of merchandizing. That Frozen two was the big biggest event over the holidays for children, for parents, for grandparents, and no, no retailer really tied in to Frozen two,

So it was a whole merchandizing opportunity. And UH, Targets cavetching like crazy that toys sales were flat while Amazon completely eclipse Target and everybody else on toys because Amazon was the best and merchandise Frozen toys and the other toys, and the department stores and the discount stores lost that magic of merchandizing of Disney theme products and other events, and to Paul's point, just just merchandizing the entire store

instead of selling out the window at Bloomingdale's across the street to LVMH, which is like imagine a line fixed fortification. The window never changes in selling all the prime real estate and the stores to the vendors who don't change the assortments and don't make it exciting and don't have themes to get shoppers out of the home, out of the apartment, out of the office to stop at the stores to shop because there's no excitement and no magic

merchandising in retail. We've talked about the theme. I guess as we think about the Amazon effect on retail, of the u s still being overstored, give us your your perception of kind of that issue. How much more does the footprint need to shrink you think, Paul, you're calling out a crisis that's really underreported other than Bloomberg. As we shrank from four hundred percent overstored to two hundred

percent overstored. So all these real estate property taxes and sales taxes that fund the educational systems for public schools across the country, that whole tax base is going to be wiped out. Two hundred thousand workers wiped out in the last two years, seventy percent of home or women. And as Lisa always references so well, the underfunded pension plans and all these retailers the employers have to fully fund. That's at risk as we shrink from four hundred percent

to two hundred percent overstored. Burt Flickintar, thank you, thank you as always for your perspective for a Flickintar managing director for a Strategic Resource group, giving us some really important color into the retail sales that came out stronger than expected, particularly as Burt was mentioning, if you strip out autos, for example, the estimate was an increase of zero point five percent month over month, and it was zero point seven percent once you strip out autos, and

it was similarly a beat. What are yousrew about autos and gas? It just on the impeachment process. We had some news out today that g A O says that the White House broke the law in aid delay. So that news is out, we will have more on that. Also. Leve Parnessey indicted associated Trump's personal lawyer Rudy Giuliani, accused Trump of lying in an interview with msnbc is Rachel Maddow last night. This is the first TV interview since

the Ukraine story. Brooklet's listening. President Trump no exactly what was going on. He was aware of all my movements. Uh, he wouldn't do anything without the consent of Y Julian or the President. In terms of the President what he has said about you, Um, he said about you and Mr Freman Egor Freman, I don't know those gentlemen, I don't know about them. I don't know what they do. You're saying that was not a true statement for the president.

That was Leve Partners indicted associated Trump's personal lord Rudy Giuliani on with the MSNBC's Rachel Meadow last night to dig into this developing story. Welcome Clinton Watts, Distinguished Research Fellow the Foreign Policy Research Instit who's also a Senior Fellow at the Center for Cyber and Homeland Security, George Washington University, joining us on the phone. Clint, thanks so much for joining us. I want to start with Leve

partners very damning commentary last night. Is he a credible witness in your mind? He is in certain context, the context where he is undertaking actions, when he's moving from place to place, when he's in Ukraine, when he saw into Rudy Giuliani. Absolutely, he's the first person witness. He's really one of the only first person witnesses who's been involved in a lot of the actions that if you

rewind all the way to that whistleblower complaint. Uh, he's at the center of the storm what was actually going on where it gets a little I think somewhat dicey is when he starts talking or referencing very high level officials across the Trump administration, how does he know those things?

And he says it almost seems that he's assuming this, or he's assuming that, for example, Attorney General bar the way he referenced the Attorney General that he was part of the team or are new It seems like he wasn't a first person witness to that. He was just sort of relaying his in person, you know, his interpretation

of the event. And so I think the further you get away from Rudy Giuliani and what and what Partners was actually doing, maybe the less credibility there is or he's implying or inferring things that he doesn't have you know, direct actual witness uh information to. So there's that side

of it. And then to this morning, coming out the Government Accountability Office, which is a nonpartisan part that takes a look at governmental actions, say that says that he said that the White House Budget Office violated federal law by with whole thing about million dollars appropriated by Congress to the Defense Department for security aid to Ukraine. I'm just wondering right now all of this that's been going on in Washington, d C. Has been treated like a

side show by markets. They have not been paying attention. It's also been treated like a side show by a significant portion of the population. At what point does it cross through? If ever? From your perspective, I'm shocked that

it hasn't. Mostly from the perspective of Congress, what Congress is saying is strip out you know how you feel about the president, um, strip out how you feel about members of Congress, the idea of the constitution and that and that's clearly you know, what I think we should be worried about, long run, is that Congress has oversight there the folks that established the budget, the executive brands of the presidents, the person that executes you know, those uh,

those parameters of that budget and defends the law. And what you're seeing is the sentence in this case clearly not having you know, its authority undertaken as the administer of the budget by the executive branch. And why would they not want to look into that just from a

balance of powers. It really shows how politics has really shaped this entire process around impeachment to where we should be asking, I think as a nation when Congress makes a law, when Congress appropriates funds, is it being followed through with according to the law. And the answer is no, it's it's very clear. And I think that's what the announcement from the Budget Office, when you look at what

they were doing, today's announcement is super critical. We're basically saying that the president can do whatever he wants with the nation's money and it doesn't matter what the law say. And I think that is a damning thing for democracy. Imagine how this plays out one or two administrations from now, where presidents see this, they take power and they say, you know what, I'm going to use all levels of financial influence to help my own political campaign or my

own personal feelings about any country. That's definitely not how we want our government to run. Okay. So, just to follow upon that, Colin, how do you think the new revelations by left partners as well as the g a O finding today, how do you think that will what will mean for the impeachment trial. I sadly think it don't. It won't mean much. It just seems that we're not going to have a real trial where evidence is put forward. Maybe you will see some Republican senators. We've already seen

some notions that they would like to see witnesses come forward. Um, maybe it will change that in the sense that there will be enough Republicans that will push to see witnesses come forward. But then if you only have partners come I'm not sure we'll have much of an impact. I think the key person in all of this, to be honest, is John Bolton. I mean he is a witness who was trying to seems to pursue foreign policy in a in an appropriate way led by the government, not a

personal compath, asked Rudy Giuliani. As a president lawyer, he seems to understand both the budget process, He's a long time hand in the US government. I also see him as somebody who was similar to Jeff Sessions, which is not going to violate the law and may have strong personal feelings and convictions about what they want to see the United States pursue, but won't really break out of the norms uh in this case. And I think that's what. If there's any witness that I think is important is this,

I think it's John Bolton. And you saw that in the testimony of Fiona Hill during the House hearing. Clint Watts, thank you so much for being with us. Clint Watts is Distinguished Research Fellow for the Foreign Policy Research Institute, also Senior Fellow at the Center for Cyber and Homeland Security at George Washington University, and author of a book Messing with the Enemy, Surviving in a social media world of hackers, terrorists, Russians and fake news. Lucky to have

with us today. The director of Research at the World Gold Council a Juan Carlos Artigas, and it joins us here in our Bloomberg in our active broker studios. It's really interesting to me to see how many pro gold calls we have gotten recently, including from a top executive from Bridgewater associate saying the gold is headed to two tho dollars now it's from fifteen fifty currently. What are

the main drivers of that? Yeah, and thank you so much for having me, by the way, And what's interesting is that, um, there are not only the asset managers. When you talk to investors, they are we have seen more and more awareness and willingness to to consider gold. So what is behind this movie? If you look in particular at two thousand and nineteen, and you will see something like similar progressing into twenty. I would highlight um

basically three things. Number one, market risk and uncertainty are high. Yes, the stock market is going on and you have, you know, some positive developments in the global economy, but not everything is is perfect and actually some of those high valuations in the stock market are worrying investors. So that's that's one. Geopolitical risk across the world is tensions, so on and

sup for that's number one. The second part, and it's somewhat related, is that interest rates have fallen monetary policies quite a commulative There is a record number of central banks scotting rates or expanding alternative monetary policies and so on and so forth, which again reduces the opportunity cost of holding gold. So risk and uncertainty and opportunity costs

are supporting investment demand. And in addition, I think that one of the things that is important to understand when it comes to gold is that while a lot of investors and market participants think about gold in the context of hedging and and risk, the verification and so on, there's an additional side of gold dual nature of gold also as a consumer good and it's an a world component in electronics, all the electronics we interact with, and

understanding the performance of gold requires you to understand how these two sites interact. Talk to us about the central banks. I know they've been a historically have been virus of gold, aggressive virus. What's their activity level now? Is it related to gold? Central banks have are have been an integral part of the demand side of gold now for ten years in a row. Two thousand and nineteen will mark

the tenth consecutive year of net central bank purchases. In fact, two thousand and eighteen marked a record central banks collectively, but the most amount of gold since nineteen sixty seven.

Then we are waiting for final figures, final data and estimates on two thousand and nineteen, but it seems that it will be um you know, at par if not, you know, slightly lower, slightly higher than what we saw it for all in all, the most important thing central banks around the world and especially emerging markets have recognized the relevance of gold in foreign reserves as a way of divers diversifying those reserves, the reserves, but also and

as an as an asset that produces or that contributes to safety, and though those are usually the way the words they use when when they disclose their purchases. This all makes sense. We've heard from a lot of people. We've been hearing it from a lot of people for a lot of years, and since two thousand thirteen it's been a real rough road for gold, with some real

declines in the price. I'm trying to square that with the logic which would make sense that you've got, you know, basically central bank easing across the board, an effort to get inflation to pick up concerns about global growth and headwinds. So this is a sort of have in bed all these things make sense. Why haven't we seen a bigger rally? Well, actually, I think that gold has performed quite well about the

past five years. It has the returns over the past five years have been comparable and if not higher than bond markets in general, and it has outperformed conceived probably the commality complex. Commality complex over that period actually have have negative returns. Goal has had positive returns. Again, what you need to understand with gold is that it's not

just about fear, right. You have this dual nature which basically means that you do have You do see the celeration in uh in perspectives on on on economic growth that tends to soften consumer demand, and it provides a ballast. At the same time, when the price of gold like we saw in two thousand and thirteen comes down and it pulls back, you do see consumer the man stepping in,

which again provides the ballast. So understanding gold in the short term you can potentially do it only through the lens of an investment safe haven type of of of activity, but over longer periods of time, you need to understand this two dynamics on Carlos and Articus. Thanks so much for joining and really appreciate you coming in here and sharing your thoughts on gold. Thanks for listening to the

Bloomberg Panel podcast. You can subscribe and listen to Inner used at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woyits I'm on Twitter at Lisa Abram whits one. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio