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- [00:00]
A
Foreign. You are listening to an art media podcast. Yonatan, what's your number this week?
- [00:10]
B
So it's an easy one. This week it's 20. The number that really says it all. 20 hostages abducted from their homes, you know, living for more than 700 days. I know terrorists, captivity underground are back home as of yesterday. We can see it and it's real. So that's my number.
- [00:27]
A
Well, I'm gonna copy you. There is no other number this week.
- [00:30]
B
At this point in time, everything is secondary and the rest is details.
- [00:34]
A
Agreed. Okay. It is 7am in Washington, D.C. it.
- [00:47]
B
Is 1pm here in Switzerland, and I'm on the road again, as we said.
- [00:52]
A
Really, all of our collective attention this week is on the return of the hostages, but obviously a lot to be said about the days ahead. And Yonatan, what is heaviest on your mind as you look ahead?
- [01:06]
B
First of all, we've been at this for the last couple of months talking about when will the fog of war be lifted or there will be early signs of the lifting of the fog of war. I think we are entering into that period as of yesterday. It doesn't mean the war is over. I think it just means that we've had a clearing of the fog of war. We're going to talk about it today. What are we going to look for over the next couple of months to sort of assess where we stand in terms of recovery of the economy, growth and prospects of broader peace? I think the second piece is, and I'm really focused on that in Israel, day in, day out, you know, we are substituting a set of challenges that we fought bravely and, you know, in a. In a successful way. With the Shiite crescents, the Hezbollah, the Syria, Hamas and Iran, we have just replaced them with new sets of problems. So we can't lean back much like what Ben Gurion did in 47. As soon as the British mandate ended, he didn't just sit and scratch his scalp and said, okay, British are gone. What am I going to do? So I think it calls for, you know, leaning forward for a very aggressive introspection into the Israeli society, into what's broken and moving forward. And I think, you know, for me, another kind of nice sign to wrap up yesterday was Yoel Mokir, one of Israel's most prominent professors in economics, winning the Nobel Prize. So, you know, I see that as another kind of good sign into the.
- [02:23]
A
Path we're taking a bright spot for sure. And given everything you just said, given this week's news, today's episode is going to be a little bit different. We're going to take a look at, you know, a lot of what we just touched on, what the winding down of the war hopefully could mean for Israel's economy. You know, we've looked at so many signs, both the positives, the negatives, the kind of question marks over the last few months and some of the resilience in the face of existential multiple threats. So what we'll focus on now is what happens next. This is going to be our long play. But of course we couldn't put together an episode of what's your number without at least sharing an update on the Windex, the what's your number index that tracks the performance of publicly traded Israeli based or founded companies. So let's quickly take a look at that. First, Jonathan, how has it been looking the last two weeks?
- [03:18]
B
I guess, yeah, look, we're entering our fourth since we haven't done weekly, it's because of the holidays. We're entering our fourth consecutive period in which Windex is in the green. It is again beating both NASDAQ and S and P, much like last time to the tune of about 0.4% in the green. Both NASDAQ and S and P are down in the respective period 1.77% and 1.6 accordingly. So Windex again reigns superior. We're seeing the VIA IPO sort of, you know, looking steady, which is great. In our last. In our next episode, I'm going to add VIA to the Windex and I think the biggest mover which is really interesting is Compugen this week. You know, a 20 year veteran in the public markets with a very successful series of clinical trials around ovarian cancer that drove the stock 25% up over the last couple of weeks. This is a very volatile stock as a lot of biotech companies are. An interesting one for the week. And just to close on the Windex, the negatives the last couple of weeks were mostly on the D2C Israeli digitals. Right. So those are the Wix, the Fivers, Lemonade, Oddity and others. Fiverr down 5.45% Wix 6.84 Lemonade losing more than 10% on the two week period in Oddity, shedding almost 15% of its price. No app as you sort of kind of double click on those and try to understand has there been any negative dominant effect. So just kind of pointing it out there, we're going to spend the next couple of weeks digging deeper into the trends that affect Israeli companies and hopefully and I think you know a bit more about that than I do. Navan will join the IPO road of Israeli founded companies. So I think we'll have maybe our third addition to the Windex this year. Pretty hot dynamics around the IPO market from Israel and overall very strong performance also at the bottom. Good capital RA as well in the last couple of weeks.
- [05:17]
A
Yeah, kind of a mixed bag overall out here more broadly. And as I'm sitting here in D.C. the government is still shut down. Interestingly, just real quick on the Navon point. Yes, they're slated to go public at some point this month, but the government shutdown has kind of, you know, thrown a little bit of a wrench in the IPO pipeline. But the SEC actually, so normally, you know, IPOs are pretty much shut down. When the government is shut down, the process is halted. But the SEC actually came out with this little bit of a new track that helps, you know, still keep the IPO pipeline on track, more or less just a little bit delayed. So I am expecting that we will be able to add them to the Windex pretty soon. Don't worry. Yonatan.
- [05:59]
B
Yeah, and we have, we've had Oren Zev who mentioned that he's been exposed as an investor early on, so hoping this one becomes another Windex member in the next couple of weeks.
- [06:14]
A
Okay, let's move on to our long play today. We're going straight to it and we're looking at how the end of the war could impact Israel's economy in the days, weeks, months ahead. So let's just start with the obvious, Yonatan. The direct cost of the war and the national debt. We've seen Israel's debt to GDP ratio climb sharply since October 7th. And I'm just curious, you know, what are the numbers that you're looking at here? There's so much to dig through.
- [06:43]
B
Look, I think overall we look. Now I don't want to say we look back. I think it's. And it's not halfway point, right? It's somewhere towards the end of the war. So you can look back and say, look, the war's cost was around $110 billion over the span of two years. Israel being an economy of about $600 billion, is getting to the point where you could say it's roughly, you know, 10% on that every year of additional costs. That was unexpected. And as you can see, basically the debt to GDP rose from 60 to again being very simple, very reductionist on sort of the cost. The Israeli economy I think was able to absorb significantly the cost of the war and generate engines of growth in parallel. We've seen obviously the weeks exit and some others. We've seen Q2 investments in startups go back to 2021 levels. And I think you can tell by the last couple of weeks in Israel, I would say, since Prime Minister Netanyahu came back from the visit to the White House and the publication of the 21 points that the public in Israel aligns with President Trump and provides him with very significant credibility because I think the markets and the people sort of assume this is going to happen. Everybody was yesterday kind of glued to the TV and there was a lot of suspense, but there was a strong sense that once President Trump brought forward Indonesia, Qatar, Turkey and others into the fold, this is going to happen. But I think you could see in the sort of public behavior over the holiday period, et cetera, that the Israelis are seeing the fog of war starting to lift. So just a couple, couple of numbers. There is really credit card spending for September is about 1.8% above the September average over the last decade. This is very important, tells us Israelis are continuing to spend. They see this as a positive outcome, Right. Inflation is at 2.9 on an annualized basis, below government expectations, which is again a significant win for the Israeli economy given the challenges in the south. Ports and other prices going up, namely aviation. We are also seeing the employment market super tight. Right. So almost no effect on unemployment. We've seen the market also absorb a shock when it comes to Palestinian employment dominantly in the construction area, with construction continuing to be very, very strong. Again, all things considered, and I think the last data point, which I think you can opine on, is you're seeing probably similar things in the Valley in certain dynamics. Average salary in the Israeli high tech for 2025 is going to rise by 6.7. That, compounded by the strength of the shekel, makes it actually very hard for Israeli tech companies to recruit. And still we're seeing zero, net zero unemployment in the tech industry and actually a stronger demand. So higher salaries, right? Less dollars in shekel terms, less capacity to pay salaries, but still massive growth. So over, you know, when you connect the dots of those just 3, 4, 5 figures they just kind of put up on the table, you understand the coil is in its right place for significant growth over the next couple of years, assuming the fog of war is indeed lifted. And we can look back at this.
- [09:54]
A
Jonathan, let's go back to the labor market and what we're seeing there. I mean, part of the Trend line now, I assume will be thousands of reservists returning and reentering the civilian workforce. What do you expect that will do to productivity? Obviously some of them are returning to tech jobs, as you mentioned, and other companies, other parts of the economy of the workforce. But do you think that this will have any kind of significant impact?
- [10:22]
B
Look, I think again, let's talk numbers, right? The Israeli labor market is about four and a half million people at employment. The reservists are, call it at a single point, are at 100,000 or 20,000 people at this point. It's not like in the beginning of the war when it was 300,000 more than 10% of the active workforce on the top because most reservists are also on the top earners, right? This is the beauty of the Israeli solidarity that the army and the reserve call is not just for those who sort of kind of don't have a job or trying to make ends meet. It's actually the top, the elites that answer that call. I think we're not at that point anymore. So I don't see that as a significant piece impacting the labor market. I will say I think Israeli solidarity won big time over the last couple of years. There are a lot of Israelis, and I am strongly against that, that argue that Israel needs a. This is kind of a bad translation, the national therapy government, right? That it's like Israeli society is s sick or ill or whatnot. I actually think the exact opposite. I think we are a super healthy democracy. Throughout the war, you saw people who opposed the prime minister at hundreds of thousands go out there and protest. You saw folks going to miluim and then going back to protest as they were not in reserve service. You've seen through solidarity. I'm actually involved in quite a number of them projects of social workers and psychologists helping folks go back from reserve service into kind of active life. And so I'm not that concerned. I think the Israeli society. And again, this is actually for a bad reason. It's just because the war's protracted for so long. It's not like it ends and then everybody goes back. We've had the ability to kind of absorb over a long period of time the areas I am worried about is the far north and their reintegration to where they live. I think they've seen, and in that context, maybe we should say a word about the possibility. We just saw the prime minister of Lebanon saying incredible things about the need for Lebanon to get into the kind of new rhythm of the Abraham Accords. So if that happens, I think the north would flourish. But absent that, absent significant political breakthroughs, diplomatic breakthroughs up north also vis a vis Syria, it's going to be harder for those guys to go back home than it is for reservists nationwide to reintegrate the workforce.
- [12:36]
A
Well, let's talk about. You brought up Abraham Accords. This whole question of Super Sparta and Athens, what are we that has come up over the last few weeks and I think is still obviously a very, very valid question. On the one hand, a lot of signs of optimism for the kind of return of the Abraham Accords, what happens next there. On the other hand, if you recall a few weeks back when we had Professor Neta Barak Koren on, I was really struck by one of her remarks that she actually saw in kind of tracking the BDS movement as part of her work, she saw that during past ceasefires, this activity actually went up to try and isolate Israel and penalize Israel even more. So, you know, a lot of kind of conflicting things here. What do you think are the signs of optimism and maybe pessimism going forward?
- [13:27]
B
Yeah, I think three things here. First, I was appalled and I see that as evidence, to Professor Corinne's point, with the Democratic Socialist movement statement yesterday in the US which exactly aligns with us, like you would expect folks on the Democratic Socialist side to say, great, hostages are back. There's a 20 point, you know, left to push forward for Palestinian reintegration, reconstruction of Gaza. And instead you see kind of, you know, again, Israel being blamed. Israel, you know, kind of doubting whether or not this type of agreement is means for Israel to further extend its control and so on and so forth. So there are signs of that. I think we need to keep an eye on that. Now, are these going to be marginalized? You know, we saw even AOC being kind of thrown under the bus by that movement. So is this going to be marginalized or is this going to be Mamdani type dynamics that are going from the fringe to the center? That's a bit, I think you're totally right. The thing to look for, and that's the second point vis a vis Israel, absent of an Abraham Accord breakthrough, is tourism. So I think there are two T's to look for in the next couple of, I would say, quarters. One, is Israeli tourism picking up, right. Are people believing are people from abroad, non Jews, not people who do it from, you know, solidarity, that it's time to go back to Tel Aviv, to Jerusalem, to the Dead Sea, to the north and enjoy what Israel has to offer. This part of the economy has been clinically dead almost, you know, hibernating or on the verge of resuscitation, you know what I mean? So can it be revived? Big questions around that. And I think we need to keep an eye on that vis a vis BDS and so on. And the third is Turkey. Is there indeed a modus vivendi? Is there indeed a plan coming from Washington that allows through the Syria leverage that Israel created to recreate a dynamic of normalization between Israel and Turkey? There's so much to gain from that. That would be, to me, an enormous sign of Israel kind of climbing back.
- [15:26]
A
What happened there? Do you know?
- [15:28]
B
So we don't know. We don't know. And I will not be surprised if for the next couple of days this will bounce back. I actually am familiar with some of the dynam behind the stage. This is real. This is real. There are compelling reasons for both countries to engage in greater diplomatic openness. And I have a strong sense of, I wouldn't say certainty, but high probability that this will happen absent any kind of deterioration on the ground vis a vis Hamas and so on. So I am actually a big believer. Listen, $1.5 trillion economy, we spoke about that in some of our recent dynamics, specifically after President Prabojo's speech at the un. I can't tell you from experience, having written some of those speeches for President Peres. UN speeches are not written without just because a speechwriter and a president want to say something, they're diplomatically brushed for scrutiny. So it was there because it was a message being sent to the leadership in Israel and to the region. The message was Indonesia will not necessarily second itself to Saudi Arabia as it always has. We are the largest Islamic, most populated Islamic country in the world. And traditionally we have seconded our diplomatic voice to that of Saudi Arabia, having had the spiritual leadership, so on and so forth. Well, not anymore. And so I would expect that to happen. And again, Israeli exports at roughly $100 billion can double over the next, I would say, seven to eight years between India and Indonesia and greater openness in the us so I'm optimistic about that. These are things to watch for when it comes to Abraham Accord normalization, bds. It's the two T's. It's Turkey and tourism. And above and beyond, an expansion.
- [17:06]
A
Well, on the tourism front, and just to end on an even more positive note, here I was at a dinner in Silicon Valley over the weekend and the mood was so celebratory even just, you know, kind of on the eve of the hostage release, surrounded by Israelis in the community and impending hostage release. The other hot topic was will United bring back direct flights SFO to Tel Aviv? This is like, this is what we care about. And, you know, it doesn't solve the tourism problem. But if United is listening, there are a lot of people who want that flight back.
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B
They added the third New York one daily. So I think we're getting in the right direction.
- [17:48]
A
Well, we began our show with the numbers of the week, and we are going to end with the words of the week. And I think the words of the week are very fitting. It comes from Avinatan oh, one of the released hostages boss at Nvidia, who wrote to him. Avinatan O. I hope you have a good excuse for not showing up to work at Nvidia for 738 days. Every Sunday morning for two years, the head of Nvidia, Israel's HR, Gideon Rosenberg, sent an email to all employees counting the days you were in captivity and calling everyone to join him for a reminder vigil in front of the Kirya Gate held every Sunday evening. Even the global CEO, Jensen Huang, mentioned your name in every quarterly internal meeting, telling 40,000 employees that their colleague was being held captive by Hamas. How wonderful that you've returned home. I heard you have an amazing girlfriend who's eagerly waiting for you, loving parents, that you work at a place that cares for you. And I also have some pretty good news about what's happened with your stocks over the past two years. Incredible. Incredible.
- [18:57]
B
Yeah.
- [18:57]
A
There's really nothing else to say. It just captures the mood, the ability to still find humor in this, you know, incredibly joyous but bittersweet also moment.
- [19:09]
B
I think overall it sets the tone. That's the optimistic tone you see in Israel these days. Again, I think solidarity won. I think, you know, perseverance won. It's been a long war, and again, I hope we can adjourn it and look back and start kind of picking up the debris. But overall, I think you're totally right. You chose the right words. It's this mix of optimism and in a way even and laughter, knowing that the resilience wins and we're going to continue to deliver. Israeli tech delivers always. And, you know, the fact that Nvidia now has more open jobs in Israel than it has in the entirety of the EU that has 400 million people kind of tells you that Jensen Huang also knows why he chooses Israel as one of the engines of growth for the company.
- [19:52]
A
Okay. That is it for today's show. Thank you for tuning in to ARC Media's what's yous Number? We hope you found it interesting and if you did, please be sure to like, subscribe rate review. You know the drill, but most importantly, please share it with others who you think will find it interesting. And if you want to make suggestions or share your feedback, please reach out to us at what's your number? @arc media.org.
- [20:20]
B
So what's your number? Is produced by Adam James Levine already sound and video editing is by Martin Huergo. Our theme music is by Midnight Generation. I'm Yonatan Adiri. Very happy, very excited for the next episode of Israel.
- [20:34]
A
And I'm Michal Ivram, hoping for Trump's words to come into reality. A new dawn for the Middle East. We will see you back here next week.
- [20:42]
B
Next Monday. See you soon.
- [20:47]
A
This podcast offers general business and economic information and is not a comprehensive summary for investment decisions. It does not recommend or solicit any investment strategy or security.