Bloomberg Audio Studios, podcasts, radio news. Joe, do you like Persian food?
Yeah, oh yeah, definitely, Yeah.
I make I'm very proud of this, if I say so myself, A mean gourmet SAPSI. I actually don't know if I'm pronouncing it wrong, but supposedly it's the Iranian national dish, and it's a sort of like beef stew with spinach and a bunch of different herbs in it, so it's really green, and then with kidney beans. It's delicious. And the thing I like about it is you can make it and then store it and freeze it and it actually gets better over the next week or so.
This guy is my idea for a restaurant, which is just like make food and then put it in the fridge for overnight and then cervic cold, because I think like everything there, every dish is better like after a night in the fridge somehow, like all the flavors come out as like, why don't we just make this to the default eating I did a dead lae.
I'm both the most popular trader and most successful trader at Citadel. That is going viral. H barges.
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And we really do have the perfect guest. So I'm a big fan of Iranian food. I always wanted to go to Iran and I actually try it, yes, and it makes me sad that I haven't been able to do it. And with you know, recent events, terrible events in Iran. We've had anti Islamic Republic protests that have reportedly left thousands of people dead. I'm not going to say the specific estimate because it's changing all the time, and also there's not that much transparency at the moment because the
government has shut down the entire internet. But it's just sad.
Look, I know very little about Iran. I also feel like in my professional career there are multiple rounds of this mm hmm, big protests, etc. Is this the moment regime change? And to your point, which you say, like, there is very little that I trust when I see it reported. Yeah, I am extremely skeptical. Oh, tonight was the biggest set of protests we've had in years. There's never been a protest. Look at which city this is. I'm sure there are well informed people talking about this.
I don't have the heuristics, So no, generally I don't know who is well informed, what is actually signal versus what is noised. But obviously yet another sort of extraordinary development unfolding here in a mote.
What have you been hearing?
So I agree that it's difficult really to tell what are the actual facts. For sure, there's been a lot of deaths and it's horrible that it's tragic, and it's definitely thousands of deaths. But at the same time, you know there's complete blackout. What works right now is the actually outgoing landline calls, but with limited time. So, for example, my one of my analysts, who is actually in London.
At the moment, he's able to speak to his parents when they call him, and then the call gets interrupted quite quickly, but at least he can hear from them. We weren't actually sure for quite some time whether the stock market was working or not because of the blackout, because it was not possible to even to read any news from the official news agencies in Iran. So everything was down, including from what I've read, including even like the internal domestic like an internet network in Iran that
is that is very controlled. This was also down. Even ATM stopped working for a moment, I think, just like a one day brief moment. Cash transfers for working bank transfers. Apparently the local you know uber equivalent called snap was working all the time. However, GPS was not working for police, it was difficult to locate the driver and so on. So exactly what you said, it's difficult to understand exactly what is going on.
So this is of course much of Voutel. He is the CEO of Amtalon Capital, which is a fund that specializes in Iranian equities, and there aren't that many of those around.
I don't even know if there's a second one yeah.
So we enjoy talking to him, and he has really good insights into what is actually happening on the ground in Iran. The first question I should ask directly is is your team okay? Are they safe and well? The people that you actually have in the country.
Thank you for asking about that, Tracy. Have we have a local team in Tehran, part of which is actually in London at the moment. Now. Analysts who are in Tehrank who were in Iran, they left their round a few days ago when the protests were getting more intense too smaller cities to their hometowns, So the last time we've heard from them was a couple of days ago. At that time they were in a safe place. So I believe they're all fine.
I mean, just your intuition. Let's actually set aside the question of like, is this a moment where the regime would get toppled or something like that. Let's tell it, does this feel either quantitatively or qualitatively different from various episodes over the last two decades in which suddenly the Internet is looking at fairly blurry videos of Iranian protesters and asking does this feel different somehow?
Yes, it definitely does. Okay, So First of all, obviously looking at the history it teaches you not to get excited or to I don't know, hopeful for any meaningful changes. However, it does feel different and maybe maybe two things could be interesting here. First of all, as you said Joe at the beginning, it's not the first protest, it's you know, another protest over the years. And if you look at comparable situations, for example, Poland police is always close to
my heart. I'm Polish originally, and Poland when we were trying to get rid of the Soviet Union, it took nine years and every year there was a massive protest. This protest you know, died and then you know, with very brutal reaction from the government. Then the next year there was another protest. In the meantime there was martial law with you know, military on the streets and so on.
But finally many things came together and there was a tipping point at which everything collapsed, although it didn't collapse actually was it was a negotiated transition to a different regime. So you know, the establishment got an off rount to move on and it was a peaceful, negotiated transition. Similar in South Africa, based on what I know. I mean it was you know, happening in the eighties and then in the nineth these they were actual changes in Iran.
The situation is different because for many reasons, demographics have changed. So now you have I believe, around ninety three million people, out of which fifty million is between you know, fifteen and forty nine years old, like the active part of the population, and there are many more young people who are educated, who have you know, access to internet, have their own aspirations and they don't believe they can achieve
those aspirations in the current environment. And they also look at their parents and they think that they just wasted the whole generation, you know, waiting and doing nothing. So this makes them more angry and also like more decisive and confrontational. That's why I think it's you know, the
protests were so intense and so widespread. Another reason another thing that's changed is like you remember a few years ago three twenty twenty two, there were twenty three there were protests around social freedoms after an I random girl, Mazamini died and this was driven by basically by social freedoms and mainly involved young people. Right now is driven by economic difficulties. And this is this touches every every single household in Iran.
Yeah, I wanted to ask you about precisely this because the I don't want to say the cause of the recent unrest, but certainly one of the sparks seems to have been a further collapse in the currency, even higher inflation. And wasn't there something about a bank as well, a bank that was going bust supposedly with ties to the regime. How much did financial stress play into the current round of civil unrest, Well.
One hundred percent, this was the main cost. Look, the protests started on the Grand Bazaar in Tehrans. So these bazaris, I mean people who operate the bazaars, many of them run like multimillion dollar revenue companies. There are actually it's like this massive shopping made with tens of thousands of you know, smaller or bigger traders there, and they need stability to just you know, do business, right, so protesting revolution like if this is the last thing they would
think about. But they are in a situation you know where many of them are importers. To import, you need to be able to obtain a hard currency to just pay your supplier from via town China. Whoever, it's impossible to obtain to access heart currency or there's not enough of it, and that's obviously because of sanctions. Because of sanctions,
exports of Iran just went down. Iran is exporting oil only to China, so Chinese dictating all the terms, including big discounts in the price that they're paying, but also the terms of the payment. You know, the China is paying A big part of their payments are in yu one and they and they arrive in bank accounts in some Chinese bands, so we run, you know, the only thing that Iran can do with it is to buy
some Chinese goods. And what you run needs is to pay for essential goods like you know, some food products or some medical products that they need to import it at any cost. And once they allocate all their hard currency reserves to those essential products, there is not much left for other businesses. So this is one thing that is difficult to run a business. When you cannot obtain currency.
You have you know, inflation running wild. But on the other hand, your consumers are losing their purchasing power at an extraordinary pace, so no one is buying. Basically, right, you have to spend on you know, eggs, milk and bread probably you know, more than ten percent of your average monthly salary. So it looks really difficult on the economic side.
Can I ask very quickly, do you have a sense of what the current exchangery actually is, because you know, this is one of the few currencies in the world that we cannot look up on a Bloomberg terminal.
Yeah, it's around one point five million real per one dollar, which means it went down around n twenty seven ninety eight percent over the last decade, and around fifty almost fifty percent since before the war with Israel last year, so over the last seven months. So it's really it's really falling fast. Oh and one more thing you asked about the bank. Yes, actually there was a bank collapsing in Iran just a few months ago. I mean, they
formally recognized that it should be nationalized. And it's extraordinary because the size of the collapse, it was so big that it actually affected the budget of the country, the country budget for this year, so they had to reduce subsidies and just change you know, the expenditures of the budget to make room for the amount that they had to think. It was like five billion dollars that they had to put into this bank so that it doesn't
you know, collapse. It was basically, and it's another it's another example that you know makes people angry obviously because it's it's it was a huge example of corruption. So you know, there was a local, well connected entrepreneur who was running a few construction companies and it wasn't the case that you know, he called a few banks and f for some preferential loans. Now he set up a
bank offered the highest interest rates on the market. So many people just put their deposits into this bank, and then he was using those deposits to make loans to his own companies. I think it was like a majority of the loans where to his own companies. He built the biggest shopping mall in the in the region, which was you know, a crazy idea from the beginning, and many things like this, right, so another example of phonism and corruption.
This is the shopping mall that's like as big as the Pentagoners, yeah.
Twice as big. I read the journal article, twice as big as the Pentagon. This luxury shopping mall in Iran suffering from massive hyperinflation and all sorts. But I have to say, starting your own bank to fund your construction company a kind of a brilliant idea. B. This is why bank supervision and various things is important. Actually, this it's surreal to me, the reality of here is a country that right now, is it the fact of information black hole you mentioned, we don't know if the stock
market is trading. Here's a country on Earth and right now where we are in New York or where you are in London, we can't even answer the simple question is the stock market functioning right now?
Yeah? Exactly. So all the stories that I that I hear is that the way people were able to communicate is because someone had access to a starlink corpor reading in Iran, or someone's friend was working at a hospital and hospital had some access to either the White Internet
or some of these local networks. So that's why I also, it's not possible for the country to keep the black out at this scale and intensity for too not because you know, the whole economy stops right Actually, the administration of the countries is not possible right without without internet. So it's it was it was sharp intense, but it has to be short term because otherwise, you know, the country will just stop.
What happens to your portfolio in this particular scenario, your investments.
So the stock market seems to have been stable over the last week. I don't see the exact numbers yet in terms of, for example, liquidity, and I and I suspect that you know, there was not much going on because I'm not sure if even local investors had a chance to were able to put orders online. Right maybe maybe it was all school, you know, calling your broker
or going to your broker. So it was stable, so nothing Actually actually it went up by four percent and the currency was stable to the currency is easier to manipulate by by the central bank using some reserves, especially when when there's low liquidity. So I think, what would be more interesting in the next few weeks. So, for example, what happened last year after the war when there was a war between Iran and Israel in June, the stock
market was shut down for around two weeks. After it reopened, the prices didn't change much, but then local investors, mainly retail investors, this retail driven market started selling because they didn't have access to their funds, so they started selling at any price just to get money out. And there was a massive selling pressure that lasted from July until September.
And when the buyer saw a selling pressure like this, so every day you can see the queue of unfilled orders building up that will go to the next day and the next day and the next day. So people just stopped buying as well, obviously, so the market went down like irrespective of you know which saws wood quality, would valuation whatever, just a massive sell off which lasted two three months, and then it rebounded. So it went down like in dollar terms from let's say index of
I don't know, three hundred sixty to two hundred and thirty. Yes, I'm if I'm looking at this correctly, so let's say thirty six percent in dollar terms in just two and a half months. The selling pressure then was exhausted. All the sending, all the sales were absorbed. Valuations went down to the one of the I think very close levels to the like all time lows in the history of the of the Iran and stock market, which is around
twenty years old. So you know, it's always cheap, right, but this time it went you know below three times net turnings and median media for the market, right, so you could probably find stocks, you know, two times earnings. Then it rebounded, but it's still around, you know, like three and a half times earnings. So valuations are very
much still driven by war. So everything is priced for war, right, So that's that's the sentiment hasn't really recovered after the last war, and now we had protests, so everything in Iran is price for war basically.
You know, in the news, obviously we hear I think we get a better grasp and again I plead a lot of ignorance. That's not something I have a lot
of familiarity with. But what the protesters want and you hear about young people and wanting more freedoms, can you give a sort of I don't know, political economy breakdown of like you know, you don't hear about the people who obviously don't want regime change generally speaking, they we don't know much about them or who they are, who are the sort of different factions socioeconomically that and how they allocate to either side sort of I guess a class understanding of the tensions.
So there's a big group of young people and young people want freedom and opportunities and like fair rules in the economy. Basically there are older people, adults in larger cities which are more liberal. Definitely run they run is a big city, it's like twelve million people altogether, and their run. Life in the run looks different to most other cities in Iran, with you know, women no longer wearing hg J apps. It's much more open, it's much
more liberal. But also there's a big group of people who are very very religious and they support the government that is also there is a religious government. So the concept of Islamic Republic is very close close to their part and they support it and as part of their religion and part of their traditions. So in terms of you know, how they observe religious holidays, you know, going to mosque, dressing in a certain way and so on.
And now how does this split, I would say that probably between ten and thirty percent is the religious part. Ten like very religious and just listening to the to the prayer and you know, whatever political advice comes from the mosque. And so one of the afard of the society just being religious and supporting the Islamic Republic as a religious state. Just a small note that it's an
Islamic republic, but very tolerant of other religions. I mean, all the churches work normally there, from Jewish to Christian to the Austrian. You know, everyone is doing his own thing in terms of religion in Iran and it's okay. And the rest are people who want a modern, open state with the young, including the young people who want it fast basically and want to be able to follow their dreams and aspirations. So that would be the breakdown.
So I should just say we're recording this on January fifteenth. The headlines are coming pretty fast nowadays, so who knows what will happen by the time we publish this episode in just twenty four hours or so. But the latest headline is that tensions seem to have eased a little bit with the US because the Iranian government said they're not going to kill any more people, told Trump they're not going to execute more people. How should we interpret that?
Is this all over or do you expect some unrest to continue?
Well, it's hard to predict. It's very unpredictable. I mean, unrest is difficult to predict. The dynamics around the unrest. Then you know, the government of Iran is difficult to predict. But you know the government of the US is difficult to predict because you know right now, yesterday today, yesterday you had news, you had news that President Trump was saying that, yes he got information that you know, killing stopped. So this is what he was, you know, what he
wanted to achieve. So it looks better. The day before everyone thought that, you know, they are getting ready to strike Iran. So I think those things can change in twenty four hours. So it's just impossible to predict. The only thing I would I would say is that because it does feel different this time, the scale of the protests and the reasons of the protest, and also the government just comes and you know, their way out of the problem. It's the financial situation is really tough. But
some changes are likely. I'm not saying that in the next few days or weeks. Maybe it will take months, but I think it's just moving this direction. So there are some changes that are like here, and many scenarios
are possible. I mean, look at Venezuela. There was no rigion change there, right, I mean, there was a like again, negotiated solution with you know, Maduro taken out and the rest of the government and establishment just same place, but they have to cooperate, right, So there's probably more than one scenario possible for the future.
What a world we live in where civil unrest is becoming a major investment theme. Thank you Macha for coming on lots More. Really appreciate another update from you.
Thank you for having me.
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