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Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you

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Speaker 1: along with my co host Lisa Brahma Wicks. Each day

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Speaker 1: we bring you the most noteworthy and useful interviews for

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Speaker 1: you and your money, whether at the grocery store or

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Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple

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Speaker 1: podcast or wherever you listen to podcasts, as well as

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Speaker 1: at Bloomberg dot com. Today is a big day for

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Speaker 1: the big banks and reporting earnings. We had a kind

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Speaker 1: of a mixed bag. JP Morgan and City outperform expectations.

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Speaker 1: Wals Fargo came in a little bit worse than expected.

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Speaker 1: That's stockdown about four percent today. Let's dive into some

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Speaker 1: of those numbers. Ken Lee, Owned, director of Equity Research

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Speaker 1: at c f R A Research, joins us on the

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Speaker 1: phone from New York Can Thanks so much for joining us.

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Speaker 1: Give us your takeaways here from the first batch of

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Speaker 1: earnings coming from the big money center banks. The consumer

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Speaker 1: is really driving banking and those with strong large franchises

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Speaker 1: such as JP Morgan or even Bank of America Tomorrow

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Speaker 1: are are really growing those business both in terms of

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Speaker 1: loans and also why the card business UM City UM

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Speaker 1: had strong results, not as strong as JP Morgan, but

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Speaker 1: you know, Well's Fargo is still disappointing. Today we reiterated

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Speaker 1: our buy on JP Morgan and our cell on Wells

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Speaker 1: Fargo with a new CEO, It's gonna be a long

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Speaker 1: time before we see the transformation. They have twelve different

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Speaker 1: federal regulatory examinations, including the asset freeze from the Federal Reserve.

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Speaker 1: That means that their long growth was only up one percent. Uh,

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Speaker 1: we have a flat rate environment. Banks typically have half

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Speaker 1: the revenue coming from net interest income, so the other

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Speaker 1: businesses are really important. But if you have an ascid

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Speaker 1: freeze like Wells Fargo, Uh, the non net interest incomes

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Speaker 1: down sixteen percent sixteen percent to the fourth quarter. So

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Speaker 1: we're staying with our cell on Wells Fargo. I'm I'm

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Speaker 1: struggling to understand. You see, the consumer is really driving everything.

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Speaker 1: Jamie Diamond of JP Morgan saying the same thing. And

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Speaker 1: yet their consumer lending book actually there, their new loans

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Speaker 1: underwritten actually declined. Can you square that? Yeah? I can?

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Speaker 1: And what's driving um the consumers? It's actually it also

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Speaker 1: includes small business loans and uh, they're expanding into twenty

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Speaker 1: new markets. UM. Small business loans are driven not by

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Speaker 1: e commerce but by face to face and for the

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Speaker 1: US economy, that's really what's driving job growth and businesses

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Speaker 1: um In terms of the consumer loans, uh you know,

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Speaker 1: being so much flat, you know, yet strong comps a

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Speaker 1: year ago, but for all of two thousand nineteen, you know,

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Speaker 1: it was up strongly. Ken, I'm looking at the JP

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Speaker 1: morgan and the City results. Both had really strong uh

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Speaker 1: fick trading, fixed income, credit commodities trading results. Is that

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Speaker 1: just a byproduct of easy comps from a week fourth

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Speaker 1: core last year or was the market that much better

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Speaker 1: here in this fourth quarter than Thanks for the question,

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Speaker 1: and it's easy comps here over year. The sequential from

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Speaker 1: third to fourth quarter was kind of flatter up two percent.

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Speaker 1: This is why our investment plan with the with the

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Speaker 1: banks is go for the JP Morgan's or a Bank

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Speaker 1: America at large banking. We get Goldman tomorrow. They're going

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Speaker 1: to have strong also trading results in sick. It's not

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Speaker 1: going to happen for each of the quarters. In so

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Speaker 1: it's it's kind of because of the week fourth quarter

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Speaker 1: of two thousand eighteen, not the strength of the fourth

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Speaker 1: quarter of two thousand nineteen Ken It's interesting a lot

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Speaker 1: of people were saying, what is the upside of the

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Speaker 1: financial sector, and that's why we've seen the underperformance through

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Speaker 1: the rally of the past number of years. Seems like

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Speaker 1: there still is a lot of upside. If you look

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Speaker 1: at the fourth quarter, Uh, do you think that it

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Speaker 1: is an achronistic or just sort of uh, you know,

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Speaker 1: a one time deal. Uh that we got a quarter

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Speaker 1: like the one that we got in the fourth quarter

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Speaker 1: with easy ums, with a rally and risk assets, etcetera, etcetera,

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Speaker 1: and not necessarily something that can be sustained. So um.

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Speaker 1: Talking about stocks that diversified bank stocks, the larger ones

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Speaker 1: were up over thirty Most of that came in the

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Speaker 1: fourth quarter last year. We look ahead to this year,

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Speaker 1: we see some separation of the large banks. So looking

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Speaker 1: at the fundamentals matters. So long as we have a

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Speaker 1: strong US economy, job growth, that's going to drive the consumer.

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Speaker 1: When we look at is there a distressed industry where

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Speaker 1: it's alarming? Uh, possibly an energy but right now, you know,

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Speaker 1: the non performing loans for the large banks is very small. Um. Again,

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Speaker 1: then you look global, Uh, certainly city has more exposure

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Speaker 1: with more revenue coming from outside the US, from Latin

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Speaker 1: America and Asia. We prefer to stay with the U

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Speaker 1: s so UM. I think for an investor, the import

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Speaker 1: and point is the stocks are always cheap to the

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Speaker 1: SMP five there trading at about eleven or twelve times earnings.

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Speaker 1: The smps up you know, mid twenty times earnings, and

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Speaker 1: I think there's interest to look at these stocks because

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Speaker 1: on the relative valuation they appear to be attractive. So

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Speaker 1: can the big money center banks. Investment banks have had

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Speaker 1: a good run over the trailing UH twelve months. Howbout

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Speaker 1: some of the regional banks. Is that a place where

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Speaker 1: maybe investors can find some value. UM, there is value,

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Speaker 1: but regional banks have a very different profile. They don't

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Speaker 1: have capital markets except from maybe a US bank. UM

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Speaker 1: we do like USA Bank, but they also have a

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Speaker 1: very much higher percentage of commercial loans to total net revenue.

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Speaker 1: Commercial loans also includes UH real estate and UH for

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Speaker 1: for the regional banks. UM. You know, when you look

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Speaker 1: at where there could be risk would be in over

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Speaker 1: to oltment of the office real estate market. We don't

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Speaker 1: see it yet, but when you got thirty of your

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Speaker 1: toiling net revenue is coming from real estate out of

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Speaker 1: your total commercial loans. You know, that's a higher risk

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Speaker 1: exposure than you're going to see what the money center back.

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Speaker 1: And one thing that I thought was interesting with cities

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Speaker 1: earnings in particular was that their expenses went up, and

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Speaker 1: I had to do with their personnel costs as well

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Speaker 1: as their technology investments. Do you view this as a

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Speaker 1: good sign or a bad sign? If you're not investing

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Speaker 1: with technology, then you're gonna be a You're gonna be

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Speaker 1: a loser out over the next few years. And it's

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Speaker 1: the question of where they're putting it. City has a

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Speaker 1: very concentrated business in the US. You know, they're only

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Speaker 1: in a handful of state, so this is going to

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Speaker 1: their networks on the consumer side in Mexico, Brazil and

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Speaker 1: also Asia. Uh. They also are investing in their global

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Speaker 1: corporate network work as well. Um the new hires. I

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Speaker 1: think they're trying to regain some share in the equity

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Speaker 1: underwriting business, so it's more bankers. Nobody wants to be

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Speaker 1: in trading, and I think that's the theme you're gonna

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Speaker 1: see all week. Even though you saw that easy comps

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Speaker 1: on the thick trading um and equity trading would regulated

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Speaker 1: capital no one really wants to be in trading. They

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Speaker 1: want to move into more stable, recurring businesses, whether it's

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Speaker 1: credit card or wealth or asset management. Ken Leon, thanks

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Speaker 1: so much for joining us. We appreciate your comments on

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Speaker 1: the banks. Kenley, owned, director of Equity Research at c

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Speaker 1: f R A joining us on the phone from New York.

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Speaker 1: Let's get straight to column that I thought was really

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Speaker 1: interesting from Bloomberg Opinion and joining us now is Mark Gilbert,

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Speaker 1: who is who at the column, and it was about

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Speaker 1: black Rock and a recent push that they have made

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Speaker 1: to change their investing criteria to account for climate change.

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Speaker 1: What was sort of the nuts and boards of this change,

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Speaker 1: Mark Well, Larry fink Is annual letter to chief executives

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Speaker 1: published today basically said there's a fundamental reshaping of the

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Speaker 1: financial world going on as as the climate crisis becomes

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Speaker 1: front and center. UM. So black Rock says it's going

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Speaker 1: to put environmental, social and governance issues and sustainability at

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Speaker 1: the center of its investment approach. UM. In practice, that

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Speaker 1: means basically doubling the number of E s G exchange

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Speaker 1: trade of funds it offers, its planning to increase the

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Speaker 1: amount of allocates to so socially responsible investing basically tenfold

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Speaker 1: in the coming decade. But in practical terms, because black Rock,

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Speaker 1: which manages seven trillion dollars, is the world's biggest fund manager,

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Speaker 1: because so much of it is wrapped up in basically

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Speaker 1: index tracking products, in practical terms, a lot of that

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Speaker 1: investment assets is not available to basically participate in this

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Speaker 1: push against climate change. So, Mark, we've been hearing more

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Speaker 1: and more and more about e s G investing, social investing,

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Speaker 1: sustainable investing. But boy, when Larry Fink and black Rock

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Speaker 1: put their name behind it, it really amps up the conversation.

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Speaker 1: What's the trend been in s G investing? It's massive.

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Speaker 1: I mean, in the past two years, my inbox, my

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Speaker 1: email inboxes just inundated with initiatives with a new growing

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Speaker 1: awareness that look, it's not climate change, it's a climate

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Speaker 1: crisis um, and that the fund managers, because they're the

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Speaker 1: main allocators of capital in the world, they're at the

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Speaker 1: forefront um of the fight to persuade companies and to

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Speaker 1: force boards to pay more attention to their greenhouse emissions

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Speaker 1: and to basically save the planet. Well understood, The question

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Speaker 1: here is to the s G strategies effectively uh put

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Speaker 1: into place some kinds of measurers to aliorate the situation.

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Speaker 1: Or is it sort of uh cover up, not not

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Speaker 1: cover up. That makes it sound illicit, but it was

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Speaker 1: you know something where it's basically it looks good, it's

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Speaker 1: putting lipstick on a pick. Is there an element of that?

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Speaker 1: There's an element of green washing? Shure e s G

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Speaker 1: is a key factor for millennials, for example, for the

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Speaker 1: younger class of investors, who every film manager wants to

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Speaker 1: get on board early and they're saving career um and

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Speaker 1: basically lock them in for life, so that there's an

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Speaker 1: element of green washing. But there's also a serious undercurrent

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Speaker 1: to this which has grown over the past couple of years,

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Speaker 1: which is that Look, one of the things Larry Thinks

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Speaker 1: says in his letter is if you don't know what

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Speaker 1: the future is going to be for let's say flood insurance,

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Speaker 1: then how can you issue thirty year mortgages. If you

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Speaker 1: don't know what the climate costs are going to be

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Speaker 1: for cities, then how can you lend them money through

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Speaker 1: the municipal bond market? So clearly the climate change is

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Speaker 1: affecting the world of finance in a fundamental way um,

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Speaker 1: and that is forcing investment funds to pay attention in

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Speaker 1: a way that they haven't done before. So, yes, there's

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Speaker 1: an element of dream washing. Yes there's an element of

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Speaker 1: me too, of being seen to be doing the right thing.

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Speaker 1: But I think underpinning this is a genuine fundamental change

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Speaker 1: in thinking about what is needed to save the planet, because,

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Speaker 1: let's face it, there's no point having returns of seven

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Speaker 1: eight nine percent of there's no planner to enjoy them.

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Speaker 1: In Mark's is there any sense you mentioned returns? Do

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Speaker 1: we have any data yet to show whether E S

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Speaker 1: G investing, whether I sacrifice performance to amp up my

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Speaker 1: E S G factor. I can show you returns that

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Speaker 1: prove that it's fantastic for your returns, and I can

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Speaker 1: show you studies that show it's absolutely detrimental for your returns. Um,

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Speaker 1: the jury is still out on at one thing. Cliff

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Speaker 1: Cliff hasness of a q R. He argues that if

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Speaker 1: you're not losing returns, then you're not really doing the

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Speaker 1: job of socially responsible investing, because you want the companies

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Speaker 1: you punished to pay more for their capital, that in

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Speaker 1: turn would lead to higher returns for those willing to

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Speaker 1: lend to them, and so you should be willing to

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Speaker 1: sacrific five stold returns if in fact you want to

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Speaker 1: force those companies to do more in terms of their

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Speaker 1: greenhouse gas emissions. And I have some I have a

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Speaker 1: lot of sympathy for that few. There's another issue here,

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Speaker 1: which is that, Okay, the millennials, they say they want

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Speaker 1: a s G, are they willing to pay more for it?

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Speaker 1: You know, the the rise of exchange of trade of

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Speaker 1: funds has pushed fees down all across the industry. But

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Speaker 1: if you want those exchange traded funds to be actively

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Speaker 1: engaging with boards, that cost money, and it cost time,

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Speaker 1: and that means that the low fees that have been

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Speaker 1: enjoyed in ETF so far probably aren't sustainable if you

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Speaker 1: want that those trillions of dollars of capital that are

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Speaker 1: in index tracking funds to be available to engage with boards.

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Speaker 1: Done a second, are you saying that basically black Rock

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Speaker 1: doesn't have enough it doesn't have enough resources to be

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Speaker 1: active on the boards of some of these companies to

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Speaker 1: affect greener changes without higher without higher fees. Two thirds

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Speaker 1: of that seven trillion of assets are and in next

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Speaker 1: tracking products, and that the drive to you know, the

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Speaker 1: doubling we've seen in e t F s two seven

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Speaker 1: to two seven to well normal six trillion dollars in

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Speaker 1: the past five years has been driven up mostly by

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Speaker 1: lower fees. And if you're charging lower fees for an

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Speaker 1: index tracking product, then you can't allocate the staff on

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Speaker 1: that asset to go and engage with the boards. It's

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Speaker 1: simple maths. So, Mark, what I noticed store in my

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Speaker 1: career is that E s G investing really seemed to

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Speaker 1: begin or grow or take shape in Europe and then

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Speaker 1: moved to the US too. Why did that happen? Europe

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Speaker 1: still ahead on this issue that the European Union is

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Speaker 1: going to come up later this year whether what it

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Speaker 1: calls a taxonomy, a set of criteria which is designed

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Speaker 1: to avoid the greenwashing issue. It's designed to set standards

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Speaker 1: for what counters in the s G funds. It's designed

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Speaker 1: to set standard for what counters a green bond. M

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Speaker 1: Europe has just been been ahead of this game. I'm

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Speaker 1: not really sure why. Culturally, I guess we're just that

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Speaker 1: much more in hune with the environment. Mark Gilbert, thanks

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Speaker 1: so much for joining US market. Mark Gilmbert is a

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Speaker 1: bloomber view calmness. Joining US from London. You can read

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Speaker 1: more of Mark's work, Bloomberg Opinion work and that of

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Speaker 1: other Bloomberg Opinion writers on the terminal by typing an O, P,

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Speaker 1: I N GO or on the web Bloomberg dot com

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Speaker 1: slash opinion. They have just some great work. Well. Overnight

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Speaker 1: yesterday afternoon, the US said that it was no longer

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Speaker 1: considering China a currency manipulator. Why whatever labeled China that

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Speaker 1: in the first place still remains unclear. Why I decided

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Speaker 1: to strip it of that label is much more clear

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Speaker 1: as we head into the final stages of the Phase

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Speaker 1: one negotiations between the US and China. Joining US now

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Speaker 1: Damian sass Our, Chief Markets correspondent having to do with

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Speaker 1: emerging markets for Bloomberg Intelligence here, uh, particularly the debt

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Speaker 1: side of things. Can you make sense of what what

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Speaker 1: of this in any way, shape or form? Well, I

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Speaker 1: think the way we have to begin is because I mean, look,

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Speaker 1: there's three criteria that the United States government mandates for

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Speaker 1: some for a country to be deemed the currency manipulator

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Speaker 1: one and each have a trade surplus with the U

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Speaker 1: S that's greater than twenty billion U S dollars China

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Speaker 1: did satisfy that criteria. The other two, that being a

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Speaker 1: current account surplus um in access to two percent of

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Speaker 1: GDP and persistent one sided effects intervention um really didn't materialize.

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Speaker 1: And so, yeah, you're absolutely right. It was a little

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Speaker 1: bit of a mystery as to how the U s

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Speaker 1: actually labeled them in the first place, but it's not

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Speaker 1: a really big mystery because they labeled them literally the

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Speaker 1: day after the UN broke above seven. So it was

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Speaker 1: more political than anything. And I think the Trump administration

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Speaker 1: is really using this designation as a way to kind

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Speaker 1: of force the hand of other countries. All right, so

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Speaker 1: does what's the practical implication of the US labeling China manipulator?

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Speaker 1: And then I guess removing that classification, was there any

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Speaker 1: practical in the global trade scheme of things of all?

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Speaker 1: None whatsoever? I mean, the only thing being labeled the

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Speaker 1: currency manipulated by the US means you can't be involved

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Speaker 1: in government procurement contracts, right, which China was never involved

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Speaker 1: with anyway. So the impact on China is not so much.

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Speaker 1: I mean, what's interesting though, is not so much who

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Speaker 1: is labeled the currency manipulator or not on the list.

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Speaker 1: This this round like Thailand. Thailand was not on the

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Speaker 1: I mean, they have been actively intervening in their currency

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Speaker 1: to protect the box from appreciating for the better part

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Speaker 1: of the last year, yet they were not on this list.

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Speaker 1: Others who were Switzerland, the Netherlands, Germany. The qualitative statement

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Speaker 1: of accompany that currency manipulator, Well, it was more about

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Speaker 1: about them saying that they need to stimulate a fiscal stimulus.

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Speaker 1: There's not an a fiscal stimulus relative to what they

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Speaker 1: should be stimulating. Um. With regard to Singapore, their savings

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Speaker 1: rate is too high, so they're labeled the currency manipulated.

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Speaker 1: There's all sorts of different you know, kind of a

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Speaker 1: qualitative assessments around these countries, and so far the United

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Speaker 1: States is concerned with regard to China. The interesting thing

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Speaker 1: here is there's a need for greater trend parency between

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Speaker 1: China's policy banks and their fex activities, which obviously makes

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Speaker 1: sense and at least now we're just talking a little

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Speaker 1: bit earlier about the massive CNY option volumes that have

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Speaker 1: been going through over the better part of the last

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Speaker 1: two days. We saw thirteen billion rnimbi options trade yesterday.

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Speaker 1: Really discussing this with me I want to shift gears

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Speaker 1: are a little bit away from the options trading, which

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Speaker 1: is interesting in light of the fact that there wasn't

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Speaker 1: a lot of actual movement in the actual price action.

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Speaker 1: I am wondering about some of the numbers in the

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Speaker 1: data that we got this week about trade and just

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Speaker 1: where it's been rerouted in China and some of the

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Speaker 1: potential consequences to the economy of the ongoing trade skirmish.

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Speaker 1: I think it's interesting that they've actually offset the entirety

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Speaker 1: of any impact with the U. S Can you talk

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Speaker 1: a little bit that, Yeah, so you trade with the US,

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Speaker 1: I mean, like, first of all, trying to announced a

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Speaker 1: trade balance overnight expanded to about forty billion dollars. US

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Speaker 1: exports and imports both surprised to the upside. Trade with

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Speaker 1: the US, however, down eleven for the full year twenty nine.

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Speaker 1: It was the EU and the a C in the

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Speaker 1: Southeast Asian Bloc that picked up the slack there. So

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Speaker 1: you know, it's it's really as you say, it's about

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Speaker 1: um a rejiggering of trading within the Asian bloc, right,

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Speaker 1: and so if you know trade with the US is

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Speaker 1: indeed gonna you know, decline or remain at lower levels

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Speaker 1: than they have been in the past. It makes perfect

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Speaker 1: sense that you would see trade with Malaysia, Indonesia, Thailand

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Speaker 1: and so forth go up simply because those are the

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Speaker 1: countries that the US is probably gonna do more business with,

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Speaker 1: So they're going to serve as a bit of a

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Speaker 1: conduit into China, if you follow me. So yeah, look,

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Speaker 1: I mean, I think I think the trade data was interesting.

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Speaker 1: I think it was um it was good. But we

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Speaker 1: have total social financing data coming out of China overnight,

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Speaker 1: and that is going to be for me, far more

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Speaker 1: important because that's if we don't see long term corporate

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Speaker 1: lending pick up in China. I think you're gonna see

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Speaker 1: a lot more PBOC stimulus throughout the better part of

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Speaker 1: this year, and that might not necessarily be a bad thing.

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Speaker 1: It would obviously be good for foreign holders of China

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Speaker 1: government bonds, but I can't see that being necessarily a

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Speaker 1: really good thing for a lot of local equities in China.

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Speaker 1: So we are presumably getting a Phase one trade deale

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Speaker 1: signed tomorrow. We've not seen anything on paper, so we're

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Speaker 1: as Michael McKee said, he's not even gonna think about

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Speaker 1: it until he sees it on. We may never know.

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Speaker 1: You have to really something, don't that right exactly? So

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Speaker 1: I mean, did the merchant markets care about this or

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Speaker 1: is this kind of much do about nothing? You know?

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Speaker 1: I mean I think they would care a lot if

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Speaker 1: nothing got done, But right now it seems fully priced

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Speaker 1: to me, Paul, And you know what I'm really more

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Speaker 1: focused on. I'm really more focused on, um, the EU

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Speaker 1: and you know, um we have Mr Hogan, you know,

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Speaker 1: the EU Trade Commissioner in the United States today meeting

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Speaker 1: with Lyon Heiser, and you know, this is about autos,

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Speaker 1: this is about big ticket sales, is about durables. And

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Speaker 1: so for me, I'm interested to see how that goes

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Speaker 1: because if indeed China is not going to Trump's whipping

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Speaker 1: boy for the better part of you know, this election year,

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Speaker 1: and his focus shifts to the European region, that would

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Speaker 1: be obviously interesting in the impact on a lot of

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Speaker 1: the euro denominated emerging market countries in my universe, poland

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Speaker 1: Hungry check. Obviously that wouldn't be a good thing from

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Speaker 1: any of those countries. Just real quick. Here, A lot

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Speaker 1: of people are saying that the Chinese consumer is showing

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Speaker 1: signs of strength again, or at least stabilization, just real

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Speaker 1: quick buying that, you know. I mean, we've talked a

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Speaker 1: lot about and you know, I came here prepared to

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Speaker 1: talk about China defaults with you, and you know, it's

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Speaker 1: really interesting to me forget about the consumer because for me,

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Speaker 1: you know, come on, I mean, I did it just

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Speaker 1: for you. But I mean I mean Kinghai Provincial, Taiwu,

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Speaker 1: Dandong Port, I mean, I've been following some of this

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Speaker 1: very honestly. I actually met the former Traman Wangwa Ling

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Speaker 1: of Dengong Port back in the days, the biggest port

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Speaker 1: in northeastern China, kind of by North Korea. And my goodness,

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Speaker 1: the forceful ruling that came out of Leona Ling Province,

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Speaker 1: I'm sorry if I'm uh pronounced that. Well, it was

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Speaker 1: such a bad ruling for creditors and investors in that issue.

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Speaker 1: I mean, if we see more of that, this is

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Speaker 1: gonna be uh it's it's basically going to deter a

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Speaker 1: lot of officer investors from participating in their local credit markets,

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Speaker 1: which is not good for the China consumer. Damon. I've

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Speaker 1: got to say, we have to have a two hour special.

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Speaker 1: Yes we do, Yes, I'm sure he's got a podcast

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Speaker 1: we can probably listen in. Damien sass Our, chief Emerging

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Speaker 1: markets credit strategists for Bloomberg Intelligence, giving us his thoughts

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Speaker 1: on we're getting some trade discussions and trade manipulating currency

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Speaker 1: manipulator discussions between the US and China. But of course

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Speaker 1: tomorrow signing the Phase one deal between the US and China,

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Speaker 1: it's got to be good for markets. Well, the gig

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Speaker 1: economy has really been a new development over the last

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Speaker 1: ten or fifteen years. Forty eight percent of millenear workers

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Speaker 1: say they earn extra income on the side. According to

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Speaker 1: a new bank rate dot com survey, Explosion an Opportunity

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Speaker 1: ses terra on more people across different generations into side hustles.

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Speaker 1: Gen xers of baby boomers said they've engaged in the

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Speaker 1: gig gig economy. It's not just uber and lift, it's

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Speaker 1: also impacting business such as jewelry and accessories. Jessica Harron

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Speaker 1: is a founder and chief executive officer of Stella and

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Speaker 1: dot based in San Francisco, but joining us in our

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Speaker 1: Bloomberg Interactive Broker studio. So, Jessica, thanks so much for

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Speaker 1: being with us. Tell us a little bit about Stella

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Speaker 1: and dot. What is the company? What do you guys do? Well?

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Speaker 1: Thanks for having the Stelling Dot is a mission driven

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Speaker 1: company created to help women earn flexible income in a

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Speaker 1: modern way. We do that by paying commissions when people

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Speaker 1: share our products across our three brands in fashion, skincare,

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Speaker 1: and accessories, and we are now modernizing to make that

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Speaker 1: even more digital than ever before. So basically, if somebody

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Speaker 1: shares something on social media and it gets sold or

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Speaker 1: it gets you know, some kind of uh gaining popularity,

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Speaker 1: they get a commission. They do if people shop their link.

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Speaker 1: But we also power pop ups with our point of

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Speaker 1: sale system, so they have one powerful platform where they

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Speaker 1: can share both in person and online. In order to

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Speaker 1: pay a real bill, they need to be able to

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Speaker 1: generate enough sales. So now we have a waited for

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Speaker 1: them to do that across our brands and categories and

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Speaker 1: whether they want to sell in person or online, adding

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Speaker 1: real value to the customer. How big is the commission

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Speaker 1: up to and it's paid weekly, which is dramatically different

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Speaker 1: than what you might do in typical affiliate marketing where

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Speaker 1: you get a very small percent thirty days later. All right,

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Speaker 1: so how many people give us a sense of your company,

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Speaker 1: how many ambassadors do you have and gives a sense

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Speaker 1: that kind of the growth of your company. Well, we're

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Speaker 1: over a hundred million in revenue and we have over

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Speaker 1: thirty thousand independent ambassadors that share our product largely part time,

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Speaker 1: so they do this on top of another full time

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Speaker 1: job or part time job, and it's a way to

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Speaker 1: get an extra one hundred thousand dollars a month, even

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Speaker 1: though we have people who earn full time income into

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Speaker 1: it much more. Really, people look at this as a

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Speaker 1: way to augment the fun in their life and money

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Speaker 1: in their life. And this is so interesting to me

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Speaker 1: on many levels. Number One, how this replaces advertising because

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Speaker 1: in some ways, uh, there was sort of the social

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00:24:06,920 --> 00:24:10,000
Speaker 1: sort of embedded advertising of ambassadors, sort of going to

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Speaker 1: parties people who are popular, getting page to use a products.

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Speaker 1: Does this kind of replace that in a way, and

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Speaker 1: you could do it with less time and not having

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Speaker 1: to go to the party and just sort of message

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Speaker 1: a link and call it a day. We really innovated

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Speaker 1: our classic direct sales business model and did away with

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Speaker 1: complex play plans and really built solid technology so that

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00:24:28,359 --> 00:24:32,679
Speaker 1: people can add real value by texting personal recommendations and

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Speaker 1: making it shoppable. In addition to doing pop ups. People

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00:24:35,119 --> 00:24:37,399
Speaker 1: still do like to get together in person, but more

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Speaker 1: and more they want to interact online and not be

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Speaker 1: dependent on you know, posting on Facebook or things like that,

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Speaker 1: but like real personal service. So yes, it is a

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Speaker 1: modern day version of how people can earn but without

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Speaker 1: having to be a social media influencer, create your own

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Speaker 1: content or ship your own product. So Lisa and I

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Speaker 1: we see economic data every day, and one of the

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Speaker 1: pieces of economic data is this the unp woyment rate.

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Speaker 1: Is that you know, sixty year low. Does that make

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Speaker 1: it difficult for you to find ambassadors if they're already

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Speaker 1: fully employed. Economics is my background and my point of

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Speaker 1: passion and why I wanted to do this. I so

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Speaker 1: firmly believe that women are still underserved in the gig

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Speaker 1: economy at full employment, because if you look at what's happening,

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Speaker 1: if you look at millennials, half of them have a gig.

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Speaker 1: But if women, they're seventy primary caregivers and they're half

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00:25:25,280 --> 00:25:28,159
Speaker 1: of them are doing gigs in childcare and dog sitting,

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Speaker 1: earning wages they could have earned before they had all

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Speaker 1: that college debt, which they have much more so than

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Speaker 1: their previous generation, so their wealth is lower, they're not

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Speaker 1: saving for retirement, so a second gig is necessary even

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Speaker 1: at full employment because it's stagnant wages and underemployed. So

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Speaker 1: this strategy has been used by other companies, and thinking

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Speaker 1: of Avon in particular, right, I mean, in another era

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00:25:49,359 --> 00:25:53,400
Speaker 1: before texting um or herbal Life also kind of tried

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00:25:53,440 --> 00:25:55,320
Speaker 1: to use a network of place. I see you just

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00:25:55,359 --> 00:25:58,720
Speaker 1: sort of be like, don't comparis to please but different.

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Speaker 1: But what makes a difference between a successful business model

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Speaker 1: and something that basically encourages someone to put some money

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Speaker 1: up front and then go out there and make it.

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Speaker 1: You know? So I got into this from an e

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00:26:10,680 --> 00:26:13,200
Speaker 1: commerce and technology background, and I never thought I would

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Speaker 1: do something and what people assume is the direct sales

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Speaker 1: space because I thought of it as a parent scheme.

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Speaker 1: But what I realized what drives that. It's really pretty simple.

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Speaker 1: Are you trying to encourage the people to shop and

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Speaker 1: store inventory or are you actually de risking and not

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Speaker 1: requiring them to buy and simply paying them when you

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00:26:31,280 --> 00:26:34,399
Speaker 1: ship direct a customer. If you remove that channel stuffing

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Speaker 1: inventory thing, it has nothing to do with those other

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Speaker 1: types of businesses. Our business is really about having no risk,

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Speaker 1: low cost to capital, and we also make it learn

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Speaker 1: and earn. We do financial education for women with self

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Speaker 1: made University talk about savings, smart business skills. So we're

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Speaker 1: on the other extreme of wanting to make sure there

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00:26:52,760 --> 00:26:55,040
Speaker 1: is a protection in there. Is there a turn to

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Speaker 1: your absolutely are are you don't if you think about

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Speaker 1: it as seasonal word our part time work. We have

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Speaker 1: teachers that on lead do it during the summer. We

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Speaker 1: have people that come in to pay for a bill

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Speaker 1: and then transition because it's low costs to start, easy

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Speaker 1: to make fast cash, and then they will pick it

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Speaker 1: up and put it down to suit their life needs.

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00:27:14,440 --> 00:27:16,680
Speaker 1: So interesting, Yeah, it really is a fascinating model, and

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00:27:16,920 --> 00:27:19,880
Speaker 1: it's interesting in light of just how many people out

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00:27:19,880 --> 00:27:22,639
Speaker 1: there are doing second and third jobs. If you can

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00:27:22,680 --> 00:27:24,080
Speaker 1: do it on your phone, it make a lot easier

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00:27:24,160 --> 00:27:26,520
Speaker 1: than to actually go somewhere. I always wonder when I

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00:27:26,560 --> 00:27:28,920
Speaker 1: walk into a Starbucks there's people sitting on their computers.

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00:27:29,000 --> 00:27:30,760
Speaker 1: What are they doing? Well, they're just if you're just

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00:27:30,760 --> 00:27:32,639
Speaker 1: going to scroll Instagram anyway, you might as well be

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00:27:32,640 --> 00:27:35,760
Speaker 1: making money and you might MICUs. We'll be earning something

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Speaker 1: doing something you love Jessica Harron, thank you so much

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00:27:38,200 --> 00:27:40,159
Speaker 1: for being with us. Thank you for having me. Jessica

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Speaker 1: Harrod is founder and chief executive officer of Stella and Dot,

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00:27:43,000 --> 00:27:45,560
Speaker 1: normally based in San Francisco, but joining us here in

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00:27:45,720 --> 00:27:49,080
Speaker 1: our Bloomberg Interactive Broker Studios. Thanks for listening to the

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00:27:49,119 --> 00:27:51,720
Speaker 1: Bloomberg P and L podcast. You can subscribe and listen

518
00:27:51,760 --> 00:27:55,119
Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer.

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00:27:55,480 --> 00:27:58,240
Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa

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00:27:58,359 --> 00:28:00,920
Speaker 1: bram Woids. I'm on Twitter at least Abramo. It's one

521
00:28:01,119 --> 00:28:03,680
Speaker 1: before the podcast. You can always catch us worldwide on

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00:28:03,760 --> 00:28:04,600
Speaker 1: Bloomberg Radio