WEBVTT - The Latest From Israel, Stock Picks and Supply Chain Disruption 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.320 --> 0:00:30.080 Let's talk about Israel. A lot of change, a lot. 0:00:30.160 --> 0:00:31.160 It's a fluid situation. 0:00:31.240 --> 0:00:31.639 We all know. 0:00:31.680 --> 0:00:34.160 It seems like President Trump is now going to take 0:00:34.280 --> 0:00:36.440 maybe up to two weeks to figure out what the 0:00:36.479 --> 0:00:38.040 next move will be on the part of the United States. 0:00:38.120 --> 0:00:40.479 Dan Williams joins his series reporter for Bloomberg News. He's 0:00:40.479 --> 0:00:44.760 in Jerusalem right now. Dan, what's the word on the 0:00:44.800 --> 0:00:46.440 ground in Israel right now? 0:00:47.600 --> 0:00:50.080 Well, as you noted, it's a waiting game. The Israelis 0:00:50.159 --> 0:00:54.440 aren't waiting, nor the Iranians. The exchange of fire Israeli 0:00:54.480 --> 0:00:59.280 as strikes and Iranian missiles continues arguably, However, the Ranian 0:00:59.320 --> 0:01:03.640 attacks do appear to be tapering off. According to an interview. 0:01:04.160 --> 0:01:06.600 In an interview he gave yesterday, the Israeli Prime Minister 0:01:07.000 --> 0:01:11.000 Benjamin and Taniawe attributed this to Israel's shift, a shift 0:01:11.040 --> 0:01:15.080 by the Israeli military to targeting launch systems for thee 0:01:15.160 --> 0:01:17.840 that the launchers are actually more important than how many 0:01:17.920 --> 0:01:20.600 missiles the Uranians have in hand, because if you can't 0:01:20.640 --> 0:01:23.640 launch them, they're virtually useless. And he said yesterday that 0:01:24.200 --> 0:01:27.680 half around half had been destroyed. That's an impressive pace, 0:01:28.120 --> 0:01:30.480 given that that mission appears to have lasted something like 0:01:30.480 --> 0:01:33.040 two three days. So at that current rate, if a 0:01:33.120 --> 0:01:37.160 kin continues and succeeds, by the Israeli account, presumably the 0:01:37.240 --> 0:01:39.720 Uranians may not have any launchers left by the end 0:01:39.760 --> 0:01:43.000 of the weekend. So these Raeli seem fairly upbeat, despite 0:01:43.080 --> 0:01:46.319 extraordinary damage to the home front from these missile strikes 0:01:46.400 --> 0:01:50.120 so far, including one on a hospital in southern Israel. 0:01:50.480 --> 0:01:53.120 Low casualty count relatively because many of the patients were 0:01:53.120 --> 0:01:57.000 moved out in advance, but nonetheless quite jarring for Israelis 0:01:57.000 --> 0:01:59.120 to see that hospital hit dan. 0:01:59.200 --> 0:02:01.639 What do we know about the timetable for President Trump 0:02:01.680 --> 0:02:03.480 to decide whether or not to strike Iran? 0:02:04.920 --> 0:02:07.320 Well, as you wisely noted, the phrasing appeared to be 0:02:07.440 --> 0:02:10.960 very deliberate, as given by our Press Secretary of the 0:02:10.960 --> 0:02:14.480 White House yesterday, within two weeks, not two weeks from now, 0:02:14.520 --> 0:02:16.919 Within two weeks which in theory could be two weeks 0:02:16.919 --> 0:02:19.200 from now. It could also be two minutes from now. 0:02:19.600 --> 0:02:22.639 So I think there's a degree of tactical operational hayze. Here. 0:02:22.960 --> 0:02:25.720 It appears that the Americans to a degree assisted the 0:02:26.360 --> 0:02:30.440 Israelis in the initial ruse that allowed the Israelis to 0:02:30.480 --> 0:02:35.120 drop the Iranians guard and launch this attack a week ago. Precisely, 0:02:35.440 --> 0:02:38.320 you'll note that right before that attack, President Trump was 0:02:38.639 --> 0:02:41.959 speaking up the prospect of a diplomatic solution, saying he 0:02:42.000 --> 0:02:45.720 wouldn't approve or wasn't looking to see Israeli military action, 0:02:46.120 --> 0:02:48.040 and then as soon as that was launched, he appeared 0:02:48.040 --> 0:02:50.320 to change his tune. Now, that could have been because 0:02:50.360 --> 0:02:53.120 of the relative success, as reported to him, of the 0:02:53.160 --> 0:02:55.480 Israeli action. It's very hard to know what to make 0:02:55.480 --> 0:02:58.560 of these statements. Formally, the Israeli say they would welcome 0:02:58.840 --> 0:03:02.480 American involvement. They're willing and able to continue this themselves. 0:03:02.840 --> 0:03:05.200 The question is whether indeed the Israeli military has the 0:03:05.240 --> 0:03:09.560 firepower to handle a specific nuclear site, one very deep 0:03:09.639 --> 0:03:12.560 underground in a mountain in an area called foot Doh. 0:03:13.040 --> 0:03:18.000 Many speculate that for all its aptitude, for all its virtuosity, operationally. 0:03:18.360 --> 0:03:21.480 The Israeli military is too lean, too small. It simply 0:03:21.520 --> 0:03:24.600 doesn't have the lift that the usfls would have to 0:03:24.639 --> 0:03:26.720 bring in very heavy bombs and finish that job. 0:03:27.240 --> 0:03:29.000 So Dan, is that I mean, that's kind of been 0:03:29.040 --> 0:03:32.519 the reporting here that you know, what is needed by 0:03:32.880 --> 0:03:34.160 or from the Americans. 0:03:34.240 --> 0:03:35.840 Is this you know, kind of. 0:03:36.320 --> 0:03:39.960 Buster bomb that can really go deep underground and get 0:03:40.280 --> 0:03:44.000 to this facility. Is that all that's left for the 0:03:44.080 --> 0:03:47.000 Israelis visa VI the Iranian nuclear capabilities? 0:03:48.040 --> 0:03:50.960 Well, daily we hear of new nuclear sites that were hit. 0:03:51.120 --> 0:03:53.400 Some of them are primary sites, some of them are 0:03:53.440 --> 0:03:56.720 secondary sites to a nuclear program that may, indeed, and 0:03:56.720 --> 0:04:00.680 the right Ranians for who said this have purely civilian components. 0:04:01.040 --> 0:04:04.880 Although Israel and the international community have long bit suspicious 0:04:04.920 --> 0:04:08.440 of the rate and the intensity of uranium enrichment, this 0:04:08.560 --> 0:04:11.480 is a program that can produce bonds fuel for nuclear 0:04:11.480 --> 0:04:15.120 weapons if enriched to beyond a certain point. So it 0:04:15.160 --> 0:04:18.720 appears that the Israelis, absent and intervention by the Americans, 0:04:18.960 --> 0:04:21.839 are demolishing everything they can in that nuclear program. While 0:04:21.880 --> 0:04:24.440 also addressing Iran's missile program. 0:04:25.240 --> 0:04:27.760 Talk to us about how Israeli officials are warning that 0:04:27.839 --> 0:04:31.480 iran Is hijacking security cameras to spine on them. 0:04:32.480 --> 0:04:35.760 Yes, it's a very interesting story by my colleague Marissa Newman. 0:04:35.839 --> 0:04:38.640 I recommend it. It would appear that the Israelis, who 0:04:38.680 --> 0:04:42.520 apparently had a foreshadowing of this with Hamas attacks from 0:04:42.520 --> 0:04:45.960 the Gaza Strip. Hamass is a Palestinian group ally to Iran. 0:04:46.360 --> 0:04:49.520 As we all know, these are ubiquitous to these security systems, 0:04:49.520 --> 0:04:52.520 many of them linked up through Bluetooth. You can see 0:04:52.560 --> 0:04:55.720 what your security camera sees on your phone sometimes if 0:04:55.720 --> 0:04:57.760 you're away from your home, and that is not a 0:04:57.839 --> 0:05:00.280 very secure system. So it appears these it is a 0:05:00.360 --> 0:05:03.799 now warning that the Iranians have hacked into these systems, 0:05:04.040 --> 0:05:07.000 which gives them a live view of certain key points 0:05:07.000 --> 0:05:09.880 in Israel, certainly Israeli cities that they have been targeting 0:05:09.880 --> 0:05:13.159 with their missiles, and gives them a real time targeting 0:05:13.400 --> 0:05:16.640 set of information, something that might allow them to adjust 0:05:16.640 --> 0:05:19.960 their aim or know if they've been successful in hitting 0:05:20.000 --> 0:05:23.120 the targets. Obviously, as in any war, each side would 0:05:23.120 --> 0:05:25.839 want to conceal from the other such information. It would 0:05:25.839 --> 0:05:28.640 appear that the Iranians have used off the shelf, very 0:05:28.680 --> 0:05:31.960 cheap technology to achieve that kind of critical information. 0:05:32.760 --> 0:05:33.560 Dan, thank you so much. 0:05:33.600 --> 0:05:36.600 We really appreciate your reporting on the ground from Jerusalem. 0:05:36.640 --> 0:05:41.120 Dan Williams, reporter Bloomberg News, giving the latest on Israeli 0:05:41.160 --> 0:05:42.160 Iranian situation. 0:05:46.760 --> 0:05:50.360 You're listening to the Bloomberg Surveillance Podcast. Catch US Live 0:05:50.440 --> 0:05:53.560 weekday afternoons from seven to ten am Eastern. Listen on 0:05:53.680 --> 0:05:57.320 Applecarplay and Android Auto with the Bloomberg Business app, or 0:05:57.480 --> 0:05:58.960 watch US Live on YouTube. 0:05:59.200 --> 0:06:03.719 David Katz is an a Chief investment officer Matrix Asset Advisors. David, 0:06:03.720 --> 0:06:07.000 what's the conversation you're having with your clients these days? 0:06:07.000 --> 0:06:08.920 They've kind of been whipsaw, but then you kind of 0:06:09.279 --> 0:06:11.400 look back and we're right where we started the year. 0:06:13.520 --> 0:06:16.920 That's a great summary. Basically, our expectation going into the 0:06:17.000 --> 0:06:19.440 year was that it was going to be less lucrative 0:06:19.480 --> 0:06:22.200 than twenty twenty three and twenty four, but with a 0:06:22.200 --> 0:06:25.200 lot of volatility. So we're getting that. The key to 0:06:25.320 --> 0:06:28.000 investment success this year is not to get overly obsessed 0:06:28.040 --> 0:06:30.200 with the very short term. You've got a lot of 0:06:30.240 --> 0:06:32.680 overhangs right now that could drive the market down five 0:06:32.800 --> 0:06:35.440 or ten percent pretty quickly. But we do think the 0:06:35.560 --> 0:06:38.960 general economy is Okay. Businesses are doing okay, and when 0:06:39.000 --> 0:06:40.560 all is said and done, the market's going to have 0:06:40.600 --> 0:06:43.520 an about average year. So the key is turned the 0:06:43.600 --> 0:06:46.880 volume down, be patient, not get caught up in the 0:06:47.279 --> 0:06:48.400 day to day volatility. 0:06:48.720 --> 0:06:51.719 Okay, David, So how do you treat this? What specific 0:06:51.760 --> 0:06:53.040 stocks are you buying? 0:06:54.640 --> 0:06:56.960 So that's an interesting thing. Right now, the market is 0:06:56.960 --> 0:06:59.359 at about twenty two times earnings, but there are many, 0:06:59.400 --> 0:07:02.120 many pockets some stocks that are undervalued. So we're out there. 0:07:02.160 --> 0:07:04.800 I'm very happy if you can buy something at ten 0:07:04.880 --> 0:07:06.800 to fifteen, sixteen times z earned as you're going to 0:07:06.839 --> 0:07:09.080 do real well. To give you just a big picture 0:07:09.120 --> 0:07:11.600 list and then we can focus in on things things 0:07:11.680 --> 0:07:16.920 like American Electric Power, Apple, five Serve, Qualcomm. We're all 0:07:17.000 --> 0:07:20.120 really good businesses at very attractive prices. Pepsi is at 0:07:20.160 --> 0:07:22.560 one of the best prices it's been at probably in 0:07:22.560 --> 0:07:24.080 the last ten years, and you're getting a four and 0:07:24.120 --> 0:07:26.720 a half percent yield while you're waiting. So lots of 0:07:26.760 --> 0:07:29.480 things out there that are real good right now. You 0:07:29.640 --> 0:07:31.520 just have to have some patients and use a six 0:07:31.560 --> 0:07:33.880 to twelve month timeframe, not try to trade for the 0:07:34.000 --> 0:07:34.920 very short term. 0:07:35.320 --> 0:07:37.880 You mentioned pepsi and the dividend yield is that something 0:07:38.120 --> 0:07:41.360 dividends and yields is that something investors should be maybe 0:07:41.960 --> 0:07:44.680 I guess paying more attention to, given that there are 0:07:44.720 --> 0:07:46.920 so many crosswinds out there this year that this year 0:07:46.960 --> 0:07:50.440 may be at best an average year for returns. Are 0:07:50.520 --> 0:07:53.360 dividends something that I don't know, Maybe people historically haven't 0:07:53.360 --> 0:07:54.760 paid attention to, but maybe they should. 0:07:55.840 --> 0:07:57.880 Well, they definitely haven't paid as much attention in the 0:07:57.920 --> 0:07:59.720 last few years, and we think that they should. We 0:07:59.720 --> 0:08:01.680 think that that's an area of the market that's got 0:08:01.720 --> 0:08:04.920 great opportunity and interestingly and importantly, it tends to be 0:08:05.040 --> 0:08:09.480 a lot more conservative and protect capital during difficult times. 0:08:09.560 --> 0:08:11.640 So if you're worried about the ups and the downs 0:08:11.640 --> 0:08:14.160 of the market, buying high dividends stocks as a way 0:08:14.200 --> 0:08:17.080 to get a good absolute return and get paid while 0:08:17.080 --> 0:08:19.080 you wait. So we think that's a really good approach 0:08:19.160 --> 0:08:20.880 and think that's the place that you want to be 0:08:20.960 --> 0:08:23.120 right now. And Pepsi has a great example of that. 0:08:23.360 --> 0:08:25.440 Stock has done really poorly year to date, So if 0:08:25.440 --> 0:08:27.200 you're getting in on it now, you're getting a very 0:08:27.240 --> 0:08:29.760 good yield wall you wait. We think they're going to 0:08:29.760 --> 0:08:32.000 fix the short term problems the stocks at sixteen and 0:08:32.040 --> 0:08:36.400 a half times earnings, generally sales North at twenty times earnings. Interestingly, 0:08:36.400 --> 0:08:39.240 if you look at PEPSI versus Coca cola, PEPSI is 0:08:39.320 --> 0:08:43.760 three standard deviations cheaper than it normally is versus Coca cola. 0:08:43.880 --> 0:08:45.640 Typically that's not going to last very long. 0:08:46.400 --> 0:08:48.640 How do you view more of the riskier corners of 0:08:48.640 --> 0:08:51.680 the market, whether you're thinking about particular small cap stocks 0:08:51.760 --> 0:08:55.560 or read balance sheet stocks, and even if you're thinking 0:08:55.559 --> 0:08:58.079 about nonprofitable tech. Obviously they saw a big move from 0:08:58.080 --> 0:09:00.440 those April lows, but are there any pockets there that 0:09:00.480 --> 0:09:01.000 you're buying? 0:09:02.360 --> 0:09:04.720 So in terms of small cap stocks and aggregate, they've 0:09:04.800 --> 0:09:08.319 underperformed the large cap stock market for the last three 0:09:08.400 --> 0:09:11.440 to five to ten years, so we do think that 0:09:11.520 --> 0:09:14.640 there is an opportunity there within that we would either 0:09:14.679 --> 0:09:17.400 focus on buying a small cap index at Russell two 0:09:17.440 --> 0:09:20.080 thousand or an s A P six hundred as a 0:09:20.080 --> 0:09:23.520 place to go. And if you're buying individual small cap names, 0:09:23.559 --> 0:09:26.959 it's very important to focus on strong balance sheets companies 0:09:26.960 --> 0:09:30.360 that are profitable, because when you're buying small caps in 0:09:30.400 --> 0:09:33.280 a economy that's going a little bit iffy in terms 0:09:33.360 --> 0:09:35.800 of tariffs. You don't want to get the whold caught 0:09:35.840 --> 0:09:37.559 holding something with a lot of debt that really could 0:09:37.600 --> 0:09:40.560 get hurt very badly. So either strong balance sheets, or 0:09:40.559 --> 0:09:44.400 focus on strong balance sheets profitable or focus on the indexes. 0:09:44.960 --> 0:09:48.000 You mentioned David Apple, and there's a name that everybody 0:09:48.440 --> 0:09:51.560 probably owns, whether they know it or not. Yet stock 0:09:51.640 --> 0:09:54.080 US down fifteen percent year today, which is we don't 0:09:54.080 --> 0:09:57.480 typically see that kind of underperformance from Apple. What's what 0:09:57.520 --> 0:09:59.800 do you think is the bowl case in the short 0:10:00.040 --> 0:10:01.360 to meet a term for Apple. 0:10:01.880 --> 0:10:06.920 Well, the underperformance lies the opportunity. We've been liking some 0:10:07.040 --> 0:10:09.360 of the Max seven that have not done well at 0:10:09.360 --> 0:10:10.680 the beginning of the year, and all of a sudden 0:10:10.679 --> 0:10:13.120 they've rebounded very nicely. Whether it's a Google or a 0:10:13.320 --> 0:10:16.440 Microsoft or an Amazon. We think that Apple's in that 0:10:16.480 --> 0:10:19.880 same situation. So short term, Apple has some issues. They 0:10:19.920 --> 0:10:22.080 really have been very late to the game in terms 0:10:22.080 --> 0:10:24.400 of AI and in terms of their last meeting. It's 0:10:24.440 --> 0:10:27.199 going to take a lot longer than anybody would like. However, 0:10:27.280 --> 0:10:29.960 they still have a dominant market share. They're going to 0:10:29.960 --> 0:10:33.720 get AI right. Wall Street and the investment community likes 0:10:33.720 --> 0:10:36.200 to own this stock, so we think it's in a 0:10:36.240 --> 0:10:38.160 trading range of about one hundred and ninety to two 0:10:38.240 --> 0:10:40.360 hundred and fifties. You're getting at the lower end of 0:10:40.360 --> 0:10:42.640 that trading range. You just want to look out six 0:10:42.720 --> 0:10:45.360 to twelve months. Something better will be happening in Apple 0:10:45.720 --> 0:10:48.160 great balance sheet and they will get it right. This 0:10:48.200 --> 0:10:49.600 is the time to get involved with it. 0:10:49.960 --> 0:10:51.679 David, thanks so much for joining us. Really appreciate it. 0:10:51.760 --> 0:10:54.720 David Kat's President, Chief Investment Officer, Matrix Asset Advisors. 0:10:54.920 --> 0:10:58.800 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:10:58.800 --> 0:11:02.320 starting at seven am on Applecarplay and Android Auto with 0:11:02.400 --> 0:11:05.400 the Bloomberg Business app. You can also listen live on 0:11:05.480 --> 0:11:09.120 Amazon Alexa from our flagship New York station, Just say 0:11:09.280 --> 0:11:11.800 Alexa play Bloomberg eleven thirty. 0:11:11.720 --> 0:11:13.319 When else at the Chase Manhattan back we get a 0:11:13.360 --> 0:11:14.560 big trade finance group. 0:11:14.720 --> 0:11:15.720 I never hung out with those. 0:11:15.760 --> 0:11:18.960 People really want make me some serious stuff, and some 0:11:18.960 --> 0:11:21.360 people do it very well, like our next guest at 0:11:21.400 --> 0:11:24.640 Lisa Russonov, CEO of l Tech, which is a technology 0:11:24.640 --> 0:11:27.560 company that works with folks in the trade finance business. 0:11:28.480 --> 0:11:30.080 Global trade. 0:11:30.760 --> 0:11:32.680 I don't know, I guess all we know about global trade. 0:11:32.720 --> 0:11:37.079 These days, is tariffs and how that's impacting global trade. 0:11:37.360 --> 0:11:38.720 How's that impacting your business? 0:11:38.840 --> 0:11:41.959 Talking to the people that actually provide credit for people 0:11:41.960 --> 0:11:45.360 who trade goods and services around the world, just. 0:11:45.320 --> 0:11:47.120 Like, well, first of all, we're to be back, thanks 0:11:47.120 --> 0:11:49.439 for having me back. First of all, I think it's 0:11:50.160 --> 0:11:52.800 the same issue as all the other lenders, all the 0:11:52.800 --> 0:11:55.480 other private credits providers and players in the markets. You're 0:11:55.520 --> 0:11:58.920 kind of facing both sides. You're facing uncertainty and economy, 0:11:59.280 --> 0:12:03.920 so you're basically facing the credit spread risks. The spreads 0:12:03.920 --> 0:12:05.840 are going off, the banks have become a little bit 0:12:05.840 --> 0:12:08.560 more conservative in terms of their credit box. But also 0:12:08.640 --> 0:12:13.520 on the other side, productivity and AI automation the technology 0:12:13.559 --> 0:12:16.640 that could streamline the entire process of credit underwriting. So 0:12:16.679 --> 0:12:19.920 there's challenges and there's opportunities. So we're facing the same 0:12:20.000 --> 0:12:23.440 kind of risk and trade finance, And honestly, the trade 0:12:23.440 --> 0:12:26.440 finance space is usually booming in terms of volume just 0:12:26.520 --> 0:12:29.560 because of there's a lot of liquidity to gaps in trade. 0:12:29.760 --> 0:12:32.600 So as a customer, for example, you have to pay 0:12:32.640 --> 0:12:35.560 your vendors in advance, so you needed money for that, 0:12:35.600 --> 0:12:37.880 you needed liquidate for that, but also you're getting paid 0:12:38.160 --> 0:12:42.040 by your customer actually on longer terms as well, so 0:12:42.200 --> 0:12:46.800 day's DSO day sales outstanding is actually increasing in the 0:12:46.840 --> 0:12:50.040 events of uncertainty. So this is where the lenders come in. 0:12:50.200 --> 0:12:53.280 They underwrite the credit, they understand the liquidit and needs, 0:12:53.320 --> 0:12:54.559 and they actually provided that credit. 0:12:55.040 --> 0:12:57.200 Private credit's been such a hot corner of the market. 0:12:57.280 --> 0:12:59.880 I know, Paul, you've talked about how in another life, Yeah, 0:13:00.040 --> 0:13:02.480 you were sure I could jump back in and be 0:13:02.559 --> 0:13:05.360 in that quarter of the market. I'm curious when you're 0:13:05.360 --> 0:13:07.480 looking at private credit because so many people have argued, 0:13:07.600 --> 0:13:11.520 especially with rates being elevated since twenty twenty two, how 0:13:11.559 --> 0:13:14.560 that would hurt that part. But it hasn't just yet. 0:13:14.600 --> 0:13:17.320 What is the resiliency there in any sort of pockets 0:13:17.360 --> 0:13:18.520 that you're seeing any red flags? 0:13:19.360 --> 0:13:21.520 I think we're not there yet. First of in terms 0:13:21.520 --> 0:13:24.080 of inflation, we're still watching what's going to happen with 0:13:24.080 --> 0:13:26.600 the economy, just like Ja Powis said this week, and 0:13:27.559 --> 0:13:29.880 the raids haven't changed, so we're watching what's going to happen. 0:13:30.000 --> 0:13:32.360 So we're not seeing a lot of write offs right now. 0:13:32.360 --> 0:13:34.760 We're not seeing a lot of paid in kinds types 0:13:34.760 --> 0:13:37.640 of arrangements with the borers, but we're just watching what's 0:13:37.640 --> 0:13:40.240 going to happen in the market. And honestly, the specific 0:13:40.320 --> 0:13:43.439 news that I'm in, which is trade finance, is a 0:13:43.520 --> 0:13:46.920 little bit more specific in terms of its acid based collateral. 0:13:47.000 --> 0:13:50.120 It's collateral based kind of lending. It's trade finance which 0:13:50.120 --> 0:13:54.480 could be backed by inventory, by receivables. You can get 0:13:54.480 --> 0:13:57.240 credit insurance wraps around the receivable, so there's a lot 0:13:57.240 --> 0:14:00.240 of structured opportunities that could actually use in the mark market. 0:14:00.520 --> 0:14:03.480 So it's not a leverage facility in a sense. It's 0:14:03.520 --> 0:14:06.000 always backed by some sort of colado, which really helps. 0:14:06.000 --> 0:14:09.960 In the environment, like what we're in, Geopolitical tensions seem 0:14:10.000 --> 0:14:12.520 to be higher now than they've been in a long 0:14:12.559 --> 0:14:16.120 time in the Middle East, Russia, Ukraine. Does that impact 0:14:16.480 --> 0:14:18.800 I'm guessing there's impacts on global trade, the cost of 0:14:18.840 --> 0:14:22.400 global trade, ensuring global trade. Does that come into your 0:14:22.400 --> 0:14:25.120 part of the market in terms of providing finance for 0:14:25.200 --> 0:14:26.800 these flow of goods and services. 0:14:26.920 --> 0:14:29.360 Yes, absolutely. As a lender, first of all, we have 0:14:29.440 --> 0:14:32.400 to be very mindful of various types of sanctions and 0:14:32.480 --> 0:14:35.080 fraud risks that are very high in the industry. But 0:14:35.120 --> 0:14:40.160 in addition to that, we have to understand the real risks. 0:14:40.360 --> 0:14:42.800 So one of the risks is, for example, is trade fraud, 0:14:43.040 --> 0:14:48.040 which basically means there is certain different terrorfs on different 0:14:48.080 --> 0:14:49.560 countries and different jurisdictions. 0:14:50.000 --> 0:14:51.200 But it's really hard. 0:14:50.960 --> 0:14:53.920 Sometimes to go back in supply chain, to drill really 0:14:53.960 --> 0:14:55.920 down and deep in supply chain and understand where the 0:14:55.960 --> 0:14:56.760 goods are coming from. 0:14:57.080 --> 0:14:57.760 So a lot of. 0:14:57.760 --> 0:15:01.120 Lenders are seeing certain uptake in terms of trade fraud, 0:15:01.160 --> 0:15:04.480 which really means if you're getting products from China, for example, 0:15:04.720 --> 0:15:07.840 but they're actually coming from Vietnam with a different certificate 0:15:07.840 --> 0:15:10.800 of goods, that's trade fraud. 0:15:11.000 --> 0:15:12.520 But at the end of the day, it's really hard. 0:15:12.560 --> 0:15:14.800 There are different rules of regulations, so it's really hard 0:15:14.800 --> 0:15:18.800 to understand the supply chain because from Vietnam we're getting 0:15:18.800 --> 0:15:20.760 a lot of textile, a lot of apparel and stuff 0:15:20.800 --> 0:15:26.000 like that. So sixty percent of textile to Vietnam is 0:15:26.040 --> 0:15:28.880 coming from China. So the supply chain could be various. 0:15:29.040 --> 0:15:33.120 Right, Who's most at risk of trade fraud other lenders. 0:15:33.160 --> 0:15:35.440 Absolutely. There have been quite a couple of cases in 0:15:35.480 --> 0:15:38.480 the past, companies like Rensail and Standing a couple of 0:15:38.520 --> 0:15:41.640 others that were defrauded by borrowers. So there is a 0:15:41.760 --> 0:15:45.400 very high fraud risk. The positive part right now and 0:15:45.480 --> 0:15:50.280 same with the economy, I think productivity AI aspiration is 0:15:51.120 --> 0:15:53.920 lenders are really trying to get a good tax stack 0:15:54.400 --> 0:15:58.080 for credit processes, for operations, for back office processes. Because 0:15:58.080 --> 0:16:01.160 trade finding specifically has a lot of trade volume, which 0:16:01.200 --> 0:16:05.000 basically means a lot of transactional volume, details, operational logistics, 0:16:05.040 --> 0:16:09.000 and things of that nature. So AI can actually do 0:16:09.440 --> 0:16:13.240 full stack analysis, full volume analysis of the entire transactional volume, 0:16:13.520 --> 0:16:17.160 and do predictive analysis as well, which basically means understand 0:16:17.240 --> 0:16:20.400 the patterns, and the patterns could be credit credit or 0:16:20.440 --> 0:16:22.920 they could be fraud, that could be operational risks, that 0:16:23.000 --> 0:16:27.080 could be terrorf risks, and other types of operational uncertainties. 0:16:27.800 --> 0:16:29.720 Who are the big trade lenders today? 0:16:29.760 --> 0:16:31.440 Is it the JP Morgan's of the world, the city 0:16:31.440 --> 0:16:33.440 banks of the world. Who does that stuff now? 0:16:33.840 --> 0:16:37.960 Actually it's different in different economies. So in Europe it's 0:16:37.960 --> 0:16:40.520 more about banks, and UK it's more about banks. In 0:16:40.560 --> 0:16:44.080 the US it's a really interesting market. So twenty twenty 0:16:44.080 --> 0:16:46.920 four last year, I'm actually seeing a lot of decrease 0:16:47.080 --> 0:16:50.400 in terms of bank lender finance for trade finances specifically. 0:16:50.640 --> 0:16:52.560 I believe in the numbers, you know, south of twenty 0:16:52.560 --> 0:16:56.840 percent decrease, and for non bank lending sector, it's actually 0:16:56.840 --> 0:16:58.360 an uptake of twenty. 0:16:58.040 --> 0:16:59.960 Five plus percent credit. 0:17:00.200 --> 0:17:03.480 It's private credit and straight it's factoring company is privately held, 0:17:03.640 --> 0:17:06.000 it's not a regulated business. So there's a lot of 0:17:06.040 --> 0:17:10.320 non bank lending groups and private credit funds and factoring 0:17:10.320 --> 0:17:13.239 companies and supply chain finance companies and FinTechs that are 0:17:13.280 --> 0:17:15.680 actually adding a lot of volume. So there's a lot 0:17:15.680 --> 0:17:17.480 of money in the economy, a lot of hedge funds 0:17:17.520 --> 0:17:19.840 like Millennium and Baliazi and now there is there raise 0:17:19.880 --> 0:17:25.480 a lot of money for trade finance strategy, millions of dollars. 0:17:25.680 --> 0:17:28.520 So at this point, actually the processing. 0:17:29.560 --> 0:17:30.480 So you can out more. 0:17:30.720 --> 0:17:33.040 We'll talk to us about near shoring, what it is 0:17:33.080 --> 0:17:34.200 and some of the issues there. 0:17:35.200 --> 0:17:37.280 Absolutely, so a lot of lenders are actually paying a 0:17:37.280 --> 0:17:40.200 lot of attention right now. First of all diversification of vendors, 0:17:40.680 --> 0:17:44.359 but second of all is near shoring. So even with 0:17:44.480 --> 0:17:46.240 government receivables. 0:17:47.080 --> 0:17:48.480 Sphere, we have to. 0:17:48.560 --> 0:17:51.800 Understand where the venor the supply the supplies are coming from. 0:17:52.080 --> 0:17:54.720 We have to understand what the risks are. We have 0:17:54.840 --> 0:17:58.240 to understand where the supplies are coming from. So for lenders, 0:17:58.280 --> 0:18:02.119 it's actually an additional layer of underwright and manual processes that 0:18:02.280 --> 0:18:06.600 have to be underwritten to understand the risks. Absolutely, just 0:18:06.640 --> 0:18:11.040 like any other you know, public market investment professionals, we're 0:18:11.080 --> 0:18:14.000 trying to understand the risks and trying to mitigate risks 0:18:14.000 --> 0:18:17.480 because we have fiducial responsibility to our LPs and investors. Right, 0:18:18.359 --> 0:18:20.199 So yeah, reassuring is what are the things a lot 0:18:20.240 --> 0:18:22.880 of lenders are looking into when trying to lend the money. 0:18:23.080 --> 0:18:25.399 What's the biggest risks to the trade finance business? I 0:18:25.440 --> 0:18:28.080 mean I could see a million of them. I mean fraud, 0:18:28.240 --> 0:18:31.720 I mean because you're dealing with buyers and sellers all 0:18:31.720 --> 0:18:34.040 over the world, crazy parts of the world. I mean, 0:18:34.400 --> 0:18:36.720 what are the big risks I guess for the trade 0:18:36.760 --> 0:18:37.439 finance business. 0:18:37.600 --> 0:18:41.120 If you decided to change professions exactly, you're pretty good 0:18:41.119 --> 0:18:43.680 of that. And you're absolutely right. There's literally hundreds of 0:18:43.720 --> 0:18:46.280 different types of risks in the in the lended space, 0:18:46.280 --> 0:18:49.280 in the trade find space. First of all, it's KYC 0:18:49.400 --> 0:18:53.840 and k KYB, no customer know your business and O 0:18:54.040 --> 0:18:58.680 fact TEX and sanctions and understanding supply chains, understand diversification 0:18:58.760 --> 0:19:01.120 of vendors, so you don't find yourself in this situation 0:19:01.320 --> 0:19:04.240 like the COVID. You know, lockdown and shut down the 0:19:04.240 --> 0:19:07.800 supply chains. But obviously credit risk are one of the risks, right. 0:19:07.840 --> 0:19:10.159 The spreads are going up in this economy. There's a 0:19:10.200 --> 0:19:14.240 lot of uncertainty, so that's why the non banking lending 0:19:14.280 --> 0:19:18.919 sector is actually trying to capture that low middle market 0:19:19.080 --> 0:19:22.440 that the banks are really not advancing against. I would 0:19:22.440 --> 0:19:25.159 say probably the biggest risk is fraud by far, and 0:19:25.200 --> 0:19:27.320 it could be so creative. It could be invoice driven, 0:19:27.320 --> 0:19:31.800 and it is driven. Jurisdiction is driven, supply chain driven, 0:19:31.840 --> 0:19:32.240 et cetera. 0:19:32.359 --> 0:19:34.440 All right, Atleasta, we learned something new every time you 0:19:34.440 --> 0:19:36.320 come in here at liasa us Off, CEO of l Tech. 0:19:40.840 --> 0:19:44.760 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:19:44.800 --> 0:19:48.119 starting at seven am Eastern on Applecarplay and Android Auto 0:19:48.240 --> 0:19:51.080 with the Bloomberg Business app. You can also watch us 0:19:51.119 --> 0:19:55.000 live every weekday on YouTube and always on the Bloomberg terminal. 0:19:55.359 --> 0:19:59.600 It is time for the newspaper segment with Lisa Mataylors. 0:19:59.600 --> 0:20:00.480 So what do you have first today? 0:20:00.560 --> 0:20:02.919 Okay, this is a story about side hustles. We hear 0:20:02.960 --> 0:20:04.320 a lot about it, right, So in the past it 0:20:04.400 --> 0:20:06.600 was a way for people to kind of pursue your passion. 0:20:06.640 --> 0:20:08.600 But now what the Wall Street Journal is saying is 0:20:08.600 --> 0:20:10.840