1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg P M L 6 00:00:20,840 --> 00:00:27,680 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well, 7 00:00:27,720 --> 00:00:31,200 Speaker 1: the SEC has been having some issues with the idea 8 00:00:31,360 --> 00:00:33,400 Speaker 1: of a bitcoin e t F, and here to talk 9 00:00:33,400 --> 00:00:36,839 Speaker 1: about that is our our own Eric Valtunist. He has 10 00:00:36,880 --> 00:00:40,720 Speaker 1: a senior E t F strategist for us at Bloomberg Intelligence. 11 00:00:41,159 --> 00:00:43,160 Speaker 1: Eric tell us about the latest. What did the SEC 12 00:00:43,840 --> 00:00:46,519 Speaker 1: recently say? They put out a letter last night and 13 00:00:46,560 --> 00:00:50,920 Speaker 1: they had thirty one questions opening to questions about yeah, 14 00:00:50,920 --> 00:00:54,200 Speaker 1: that's it right, um in five sections. It reminds me 15 00:00:54,240 --> 00:00:56,000 Speaker 1: the end of back to school when they're like, we 16 00:00:56,040 --> 00:00:58,760 Speaker 1: have one question, but it's twenty seven parts and he 17 00:00:58,840 --> 00:01:01,800 Speaker 1: spends all day answering it. Um. Look, a lot of 18 00:01:01,840 --> 00:01:05,640 Speaker 1: these questions are answered in the prospectus is it's they're 19 00:01:05,640 --> 00:01:07,679 Speaker 1: asking something like how will then not have be calculated? Well, 20 00:01:07,760 --> 00:01:10,800 Speaker 1: the perspective does address that. I think, really, what's going 21 00:01:10,840 --> 00:01:12,880 Speaker 1: on here. If you want to just kind of like 22 00:01:13,040 --> 00:01:16,880 Speaker 1: be honest about it, the SEC will be honest. I'm 23 00:01:16,880 --> 00:01:19,679 Speaker 1: just gonna be real right now, go ahead, the SEC. 24 00:01:20,040 --> 00:01:22,839 Speaker 1: This is a hot issue. They realize there's investor demand 25 00:01:22,880 --> 00:01:25,680 Speaker 1: for this big time, right, so they won't be sensitive 26 00:01:25,720 --> 00:01:27,720 Speaker 1: to that. At the same time, they're just not comfortable, 27 00:01:27,959 --> 00:01:30,080 Speaker 1: so they want to show everybody that they have been 28 00:01:30,200 --> 00:01:33,560 Speaker 1: very thoughtful about this. They're taking this very seriously. Here's 29 00:01:33,560 --> 00:01:35,240 Speaker 1: what they're concerned with. They want to throw it all 30 00:01:35,240 --> 00:01:38,240 Speaker 1: on the table, and I think that. But the thing 31 00:01:38,319 --> 00:01:40,480 Speaker 1: is a lot of these are already addressed in the prospectus. 32 00:01:40,880 --> 00:01:42,880 Speaker 1: Some of them get really deep, like how are you 33 00:01:42,880 --> 00:01:44,960 Speaker 1: going to protect against the hack? Now, that is a 34 00:01:45,040 --> 00:01:48,240 Speaker 1: question you will never ever probably be able to answer 35 00:01:49,000 --> 00:01:53,240 Speaker 1: with security. So there's always going to be some unanswerability 36 00:01:53,320 --> 00:01:55,520 Speaker 1: to some of these questions. So are you basically saying 37 00:01:55,520 --> 00:01:59,920 Speaker 1: the SEC is basically doing a c y A exercise 38 00:02:00,160 --> 00:02:03,320 Speaker 1: with this list of questions, saying to the public, look, guys, 39 00:02:03,800 --> 00:02:07,800 Speaker 1: we're concerned. We've got general concerned, and so we're not 40 00:02:07,800 --> 00:02:10,880 Speaker 1: going to prove these things yet. Thinking about it, we 41 00:02:10,919 --> 00:02:14,160 Speaker 1: don't know exactly why. We understand everyone wants to buy 42 00:02:14,160 --> 00:02:16,360 Speaker 1: these things. We get it. We're we're sensitive to that. 43 00:02:16,440 --> 00:02:20,560 Speaker 1: But um, I was barrish last night after I read it. 44 00:02:20,600 --> 00:02:22,839 Speaker 1: But I talked to a few issuers, and I don't 45 00:02:22,919 --> 00:02:24,919 Speaker 1: on the prospect on the prospect of a bit quin 46 00:02:24,960 --> 00:02:26,919 Speaker 1: et F launching, say in the next year or two, 47 00:02:27,440 --> 00:02:29,639 Speaker 1: but I don't know. I think issuers are in there, 48 00:02:29,680 --> 00:02:31,600 Speaker 1: They're gonna work with them. I've heard people are like, 49 00:02:31,639 --> 00:02:33,720 Speaker 1: we are definitely going to address these because I was thinking, 50 00:02:34,080 --> 00:02:35,720 Speaker 1: man if I was an insuer and they just came 51 00:02:35,720 --> 00:02:37,280 Speaker 1: out with with all this, I might just be like, oh, 52 00:02:37,320 --> 00:02:38,720 Speaker 1: you know, what, the heck with it, I'll just try 53 00:02:38,720 --> 00:02:41,320 Speaker 1: to launch so much money at stake here. I know 54 00:02:41,520 --> 00:02:44,519 Speaker 1: the first one out gets easily it's a billion dollar product. 55 00:02:44,520 --> 00:02:46,239 Speaker 1: I mean easily could be a billion dollar product in 56 00:02:46,240 --> 00:02:48,440 Speaker 1: a couple of days. So that is what makes this 57 00:02:48,520 --> 00:02:51,520 Speaker 1: all so exciting, although exhausting for me, because there's this 58 00:02:51,600 --> 00:02:54,800 Speaker 1: is a race, and I'm telling you every other week 59 00:02:54,840 --> 00:02:57,520 Speaker 1: there's some major turn in this race. And then this 60 00:02:57,560 --> 00:03:00,359 Speaker 1: week we had the blockchain ETFs launch, which a lot 61 00:03:00,400 --> 00:03:02,760 Speaker 1: more easier to launch. Right these are tracking equities that 62 00:03:02,800 --> 00:03:05,320 Speaker 1: are involved the blockchain technology. But even there, the sec 63 00:03:05,400 --> 00:03:08,360 Speaker 1: got a little nerve nervousness and made them take blockchain 64 00:03:08,400 --> 00:03:10,720 Speaker 1: out of their name and use something more generic, UM 65 00:03:10,760 --> 00:03:13,799 Speaker 1: like transformational data sharing. So there's a lot of concern 66 00:03:13,840 --> 00:03:15,480 Speaker 1: at the SEC that they are going to be looked 67 00:03:15,480 --> 00:03:18,440 Speaker 1: at as being a little too liberal. Um not not 68 00:03:18,600 --> 00:03:21,080 Speaker 1: not a catchy enough name for you. I'm gonna say that, 69 00:03:21,320 --> 00:03:24,520 Speaker 1: roll off the tongue transformational. Listen him. I got good 70 00:03:24,520 --> 00:03:27,440 Speaker 1: news for you. The tickers block well that that that 71 00:03:27,480 --> 00:03:29,720 Speaker 1: helps small brain here. This is but this is yesterday. 72 00:03:29,760 --> 00:03:32,359 Speaker 1: We had reality shares that are the earlier this week 73 00:03:33,120 --> 00:03:35,360 Speaker 1: on on our show, and he said, he corrected me, 74 00:03:35,400 --> 00:03:37,240 Speaker 1: is that actually that's no longer our name, and that 75 00:03:37,320 --> 00:03:39,000 Speaker 1: was the reason why it is the SEC. There's his 76 00:03:39,080 --> 00:03:42,080 Speaker 1: next gen economy. But would you think of it? I 77 00:03:42,080 --> 00:03:44,240 Speaker 1: don't know anyway, I call him the blockchain ets. The 78 00:03:44,280 --> 00:03:46,440 Speaker 1: tickers speak to that. So they're doing well. They're all 79 00:03:46,600 --> 00:03:49,440 Speaker 1: already both trading a lot, and they're off to good starts, 80 00:03:49,520 --> 00:03:53,360 Speaker 1: especially for indie issuers. I'm gotta ask about this idea 81 00:03:53,440 --> 00:03:59,320 Speaker 1: of turning everything into an exchange traded fund. The one 82 00:03:59,320 --> 00:04:01,760 Speaker 1: of the arguments war exchange traded funds is you get 83 00:04:01,840 --> 00:04:05,080 Speaker 1: daily liquidity. You can trade it like a stock. Oh 84 00:04:05,160 --> 00:04:07,120 Speaker 1: and by the way, it's not going to hit you 85 00:04:07,160 --> 00:04:10,600 Speaker 1: with those tax those onerous tax bills like a mutual fund, 86 00:04:10,880 --> 00:04:13,720 Speaker 1: even if you don't sell the fund. I'm sorry, how 87 00:04:13,720 --> 00:04:19,479 Speaker 1: does that connect with these kinds of offerings? Right? I 88 00:04:19,480 --> 00:04:22,280 Speaker 1: would go back to the originally t F s P Y. 89 00:04:22,320 --> 00:04:24,680 Speaker 1: It really was put out there to be a physically 90 00:04:24,720 --> 00:04:27,560 Speaker 1: backed version of a futures contract. So there is a 91 00:04:27,560 --> 00:04:29,800 Speaker 1: trading element to e t F and there always has been. 92 00:04:30,279 --> 00:04:32,800 Speaker 1: And I would argue, h y G, that's a leasa's 93 00:04:32,839 --> 00:04:35,400 Speaker 1: favorite et F. The HI J and K might be 94 00:04:35,440 --> 00:04:37,599 Speaker 1: your favorite, but it's a it's a it's a who knows. 95 00:04:38,240 --> 00:04:40,240 Speaker 1: I don't even need to talk. People can still in 96 00:04:40,279 --> 00:04:42,599 Speaker 1: the place ahead Eric, What else do I like? But 97 00:04:42,720 --> 00:04:47,480 Speaker 1: these are predominantly these kind of things, Bitcoin, marijuana, junk bonds, 98 00:04:47,640 --> 00:04:50,560 Speaker 1: These are predominantly used by traders looking to get quick 99 00:04:50,560 --> 00:04:54,440 Speaker 1: positions on those. You know, the retail investors are When 100 00:04:54,480 --> 00:04:56,600 Speaker 1: you say quick positions, are you trying to say you 101 00:04:56,640 --> 00:04:59,200 Speaker 1: have traders who are trying to make quick money taking 102 00:04:59,200 --> 00:05:01,680 Speaker 1: advantage of people. No, no, just quick access, but just 103 00:05:01,680 --> 00:05:03,839 Speaker 1: thin get one out. But it's got to be a 104 00:05:03,839 --> 00:05:06,560 Speaker 1: buyer and a seller. Well, someone's gonna lose money. If 105 00:05:06,560 --> 00:05:09,000 Speaker 1: someone's gonna make money, who's gonna be the loser. That's 106 00:05:09,000 --> 00:05:10,760 Speaker 1: the way the bond and stock market work anyway. I 107 00:05:10,760 --> 00:05:13,240 Speaker 1: mean there's traders and people trading those all the time 108 00:05:13,320 --> 00:05:15,840 Speaker 1: to actually things behind them. Well, and this is the key. 109 00:05:15,920 --> 00:05:18,200 Speaker 1: Hold on a second, Well they do they do? You 110 00:05:18,200 --> 00:05:20,000 Speaker 1: know any t F? Again, I always tell people that 111 00:05:20,279 --> 00:05:22,400 Speaker 1: it is uh, it is a mutual fund. It holds 112 00:05:22,400 --> 00:05:25,200 Speaker 1: the stocks in it with a custodian and the or 113 00:05:25,240 --> 00:05:29,040 Speaker 1: the bonds. All right, so you know here's the thing. 114 00:05:29,279 --> 00:05:32,159 Speaker 1: I think this is the issue is you know, with 115 00:05:32,160 --> 00:05:35,000 Speaker 1: with jump bonds, with stocks, there is something that is 116 00:05:35,040 --> 00:05:37,440 Speaker 1: a security that is backing these e t f s. 117 00:05:38,040 --> 00:05:42,880 Speaker 1: With bitcoin, I mean Morgan Stanley and Goldman Sacks have 118 00:05:42,920 --> 00:05:45,240 Speaker 1: laid out issues with how do you act as a 119 00:05:45,240 --> 00:05:48,479 Speaker 1: custodian of bitcoin? I mean what is bitcoin? How do 120 00:05:48,480 --> 00:05:50,640 Speaker 1: you store? Who's going to make sure that you know 121 00:05:51,120 --> 00:05:52,800 Speaker 1: that hackers aren't going to get in? I mean we've 122 00:05:52,880 --> 00:05:56,080 Speaker 1: we recently had a story about how hacking bitcoin is 123 00:05:56,160 --> 00:05:59,840 Speaker 1: a massive industry. I mean, these are some major issues 124 00:06:00,000 --> 00:06:03,040 Speaker 1: are and when you approve an e t F, you're 125 00:06:03,040 --> 00:06:05,039 Speaker 1: basically saying it's ready for prime time. So that's what 126 00:06:05,080 --> 00:06:07,280 Speaker 1: the SEC. This is. You know, Middle America can then 127 00:06:07,320 --> 00:06:10,040 Speaker 1: go to their brokerage account and buy this thing. That's 128 00:06:10,080 --> 00:06:13,000 Speaker 1: what the SEC is concerned with. However, there's a product 129 00:06:13,000 --> 00:06:15,200 Speaker 1: on the market GBTC, which is an over the counter 130 00:06:15,279 --> 00:06:18,800 Speaker 1: traded trust trades it huge premiums and I've heard some 131 00:06:18,839 --> 00:06:21,520 Speaker 1: discount brokerages classifying as an e t F. So I 132 00:06:21,560 --> 00:06:25,720 Speaker 1: would somewhat you use the alternative argument, which there's other 133 00:06:25,760 --> 00:06:28,760 Speaker 1: products out there that are more dangerous. At least with 134 00:06:28,800 --> 00:06:30,680 Speaker 1: an e t F, you'd bring in the nation's richest 135 00:06:30,720 --> 00:06:33,400 Speaker 1: market makers doing the tightest arbitrage. You'd bring in a 136 00:06:33,480 --> 00:06:36,440 Speaker 1: lot of liquidity, and you'd get as close to the 137 00:06:36,480 --> 00:06:39,640 Speaker 1: best possible deal. It's the best structure for something that 138 00:06:39,800 --> 00:06:42,160 Speaker 1: is as archaic or or not archaic, but as uh 139 00:06:42,920 --> 00:06:45,200 Speaker 1: new as bitcoin. I've seen it done with China A 140 00:06:45,240 --> 00:06:48,520 Speaker 1: shares they had Chinas before the government even allowed as shares. 141 00:06:48,520 --> 00:06:50,200 Speaker 1: They had to use quota from people in Hong Kong. 142 00:06:50,440 --> 00:06:51,960 Speaker 1: A t f s have this sort of history of 143 00:06:51,960 --> 00:06:55,000 Speaker 1: like nudging their way into an area, maybe even before 144 00:06:55,040 --> 00:06:56,560 Speaker 1: it's ready, and then you figure out later, oh it 145 00:06:56,720 --> 00:06:59,279 Speaker 1: is fine. But I would say bitcoin is a special case, 146 00:06:59,640 --> 00:07:02,080 Speaker 1: it's not fine. Yeah, And look at the end of 147 00:07:02,080 --> 00:07:05,400 Speaker 1: the day, though these are investment vehicles, investments do they 148 00:07:05,400 --> 00:07:07,960 Speaker 1: go down. But the question on bitcoin, though, is unlike 149 00:07:08,040 --> 00:07:10,240 Speaker 1: g l D, where I guess you're you're your feel 150 00:07:10,280 --> 00:07:11,880 Speaker 1: secure that the gold bars are in a vault with 151 00:07:11,960 --> 00:07:14,560 Speaker 1: guys with machine guns guarding it. Here you're like, yes, 152 00:07:14,640 --> 00:07:17,360 Speaker 1: someone could hack it. What would happen? Um, Although I 153 00:07:17,360 --> 00:07:18,960 Speaker 1: will say there are e t N s in the world. 154 00:07:19,360 --> 00:07:21,680 Speaker 1: E t N s have credit risk. Lehman had an 155 00:07:21,680 --> 00:07:23,440 Speaker 1: e t N People do not get their money back, 156 00:07:23,440 --> 00:07:25,640 Speaker 1: so there are products. That's why I think bitcoin, if 157 00:07:25,680 --> 00:07:26,840 Speaker 1: I were out there, I would do it an e 158 00:07:26,880 --> 00:07:29,040 Speaker 1: t N wrapper because people already go in knowing there's 159 00:07:29,040 --> 00:07:31,200 Speaker 1: credit risk. So I think E t N might be 160 00:07:31,240 --> 00:07:33,720 Speaker 1: a better vehicle for bitcoin. But no one's launched one 161 00:07:33,760 --> 00:07:36,640 Speaker 1: for whatever reason. We're filed for one. Why why do 162 00:07:36,680 --> 00:07:38,880 Speaker 1: you believe that to be so? I think right now 163 00:07:39,120 --> 00:07:42,160 Speaker 1: big banks are less willing to have anything on their 164 00:07:42,160 --> 00:07:45,000 Speaker 1: balance sheet because of regulations, so they've scaled back on 165 00:07:45,040 --> 00:07:47,280 Speaker 1: their E t N s. But if one of them 166 00:07:47,280 --> 00:07:49,080 Speaker 1: would just step up and say, you know, this is 167 00:07:49,120 --> 00:07:52,560 Speaker 1: actually a great opportunity for us. We're Okay, having this, uh, 168 00:07:52,600 --> 00:07:54,520 Speaker 1: I think it could be a really big hit product. 169 00:07:54,520 --> 00:07:56,200 Speaker 1: And if that gets liquidity and an e t F 170 00:07:56,280 --> 00:07:58,160 Speaker 1: launches after, no one will care. They'll still use the 171 00:07:58,160 --> 00:08:01,080 Speaker 1: e t N mostly. Okay, not to change the subject 172 00:08:01,160 --> 00:08:03,960 Speaker 1: too much, but you sit there reading the t leaves 173 00:08:04,000 --> 00:08:05,520 Speaker 1: of E t F world, and I just want to 174 00:08:05,560 --> 00:08:08,000 Speaker 1: get your sense what should we be paying attention to. 175 00:08:08,080 --> 00:08:11,040 Speaker 1: Are there any shifts in flows that are really notable 176 00:08:11,160 --> 00:08:14,640 Speaker 1: that you think are representative of shifts in a market sentiment? Yeah? 177 00:08:14,680 --> 00:08:16,800 Speaker 1: Two things I'll give you real quick is one, I 178 00:08:16,840 --> 00:08:21,440 Speaker 1: find people are hot about industrials and aerospace and defense. Yeah, 179 00:08:21,480 --> 00:08:23,880 Speaker 1: this is the Trump trade. But I will say those 180 00:08:24,400 --> 00:08:27,160 Speaker 1: those e t F s kicked back in after tax reform, 181 00:08:27,200 --> 00:08:28,760 Speaker 1: so I felt there was a little kick to the 182 00:08:28,760 --> 00:08:31,400 Speaker 1: Trump trade after tax reform. People thought it might have 183 00:08:31,520 --> 00:08:33,440 Speaker 1: might not have the legs it does, but it does 184 00:08:33,520 --> 00:08:35,839 Speaker 1: apparently so X L I, I T A have seen 185 00:08:35,880 --> 00:08:37,640 Speaker 1: a lot of inflows in the past couple of weeks. 186 00:08:37,880 --> 00:08:40,080 Speaker 1: And another one you're again back to your favorite topic, 187 00:08:40,160 --> 00:08:43,320 Speaker 1: is high YOU'LD debt. We've seen this interesting shift into 188 00:08:43,400 --> 00:08:45,800 Speaker 1: interest rate hedge gtfs. They haven't taken a lot, but 189 00:08:45,840 --> 00:08:47,640 Speaker 1: it's like a swell out. There could be a big 190 00:08:47,679 --> 00:08:50,120 Speaker 1: wave soon, and that is h y g H. These 191 00:08:50,120 --> 00:08:52,720 Speaker 1: are e t f s that basically take like the 192 00:08:52,800 --> 00:08:55,200 Speaker 1: high you'ld debt or investment grade debt and then they 193 00:08:55,280 --> 00:08:57,840 Speaker 1: short treasury futures in order to have no rate risk. 194 00:08:58,320 --> 00:08:59,960 Speaker 1: What you're going to find is they're starting to out 195 00:09:00,040 --> 00:09:03,120 Speaker 1: perform h y G. So h y g H has 196 00:09:03,160 --> 00:09:05,720 Speaker 1: outperformed h y G by a good degree since rates 197 00:09:05,720 --> 00:09:08,200 Speaker 1: have quietly started rising over the last four months, and 198 00:09:08,240 --> 00:09:10,520 Speaker 1: we've seen flows into this. This thing is a basically 199 00:09:10,559 --> 00:09:13,160 Speaker 1: doubled size in the past couple of weeks. Watch for 200 00:09:13,200 --> 00:09:15,760 Speaker 1: people rotating out of h y G into h y 201 00:09:15,760 --> 00:09:17,679 Speaker 1: g H, out of l q D into l q 202 00:09:17,880 --> 00:09:20,319 Speaker 1: d H. It reminds me of currency hedge dtfs a 203 00:09:20,360 --> 00:09:22,960 Speaker 1: couple of years ago, where it says I want this, 204 00:09:23,040 --> 00:09:24,920 Speaker 1: but I don't want this. It's sort of a package trade. 205 00:09:25,280 --> 00:09:27,319 Speaker 1: That's what these rate hedge dtf do. And I think 206 00:09:27,320 --> 00:09:30,640 Speaker 1: they could have some uh, they could see some flows. Eric. 207 00:09:31,200 --> 00:09:35,280 Speaker 1: When you talk about that perhaps transition from let's say 208 00:09:35,920 --> 00:09:39,160 Speaker 1: h y G to h y g H in order 209 00:09:39,200 --> 00:09:44,000 Speaker 1: to take advantage of that hedging capability, does that sale 210 00:09:44,320 --> 00:09:47,640 Speaker 1: of h y g doesn't that affect the value of 211 00:09:47,679 --> 00:09:51,680 Speaker 1: the underlying asset. Right, So if people sell h y 212 00:09:51,760 --> 00:09:54,880 Speaker 1: G and there's a lot of selling pressure, yes, uh, 213 00:09:54,920 --> 00:09:56,920 Speaker 1: somebody will take the h y G and do a redemption. 214 00:09:57,080 --> 00:09:59,360 Speaker 1: That would put selling pressure on the bond. So the 215 00:09:59,400 --> 00:10:02,360 Speaker 1: e t F would Uh, if people were selling h 216 00:10:02,480 --> 00:10:04,800 Speaker 1: y G, it would put selling pressure on the bonds ultimately. 217 00:10:05,360 --> 00:10:08,600 Speaker 1: But again that's probably gonna happen in concert with people 218 00:10:08,640 --> 00:10:12,840 Speaker 1: selling bonds. That It's not like somebody Yeah, but if 219 00:10:12,840 --> 00:10:14,840 Speaker 1: you're in a rapper that says, oh no, don't worry 220 00:10:14,880 --> 00:10:18,480 Speaker 1: about it because we're gonna hedge out the risk for you. Uh, 221 00:10:18,640 --> 00:10:21,720 Speaker 1: that might give you that false sense of security. Well again, 222 00:10:21,800 --> 00:10:25,280 Speaker 1: it still does whole own high yield debt, right, and 223 00:10:25,320 --> 00:10:27,439 Speaker 1: then it also is gonna short trauge. In other words, 224 00:10:27,720 --> 00:10:29,520 Speaker 1: it's not just saying we're gonna do this and then 225 00:10:29,520 --> 00:10:32,000 Speaker 1: we're gonna do whatever with the money. It actually does 226 00:10:32,000 --> 00:10:34,800 Speaker 1: it with the money. I'd almost equate this to the way, 227 00:10:35,520 --> 00:10:37,640 Speaker 1: you know, if an institution has a prime broker and 228 00:10:37,679 --> 00:10:40,120 Speaker 1: you want to put that trade on, that's what they do. 229 00:10:40,679 --> 00:10:43,320 Speaker 1: E t F have democratized everything, and like you said, 230 00:10:43,440 --> 00:10:45,600 Speaker 1: does everything need to be democratized? That's a big debate. 231 00:10:45,880 --> 00:10:49,079 Speaker 1: But package trades getting a currency hedge exposure or high 232 00:10:49,120 --> 00:10:52,160 Speaker 1: yield debt exposure, that is ultimately what's happening here. We 233 00:10:52,240 --> 00:10:53,800 Speaker 1: gotta leave it there. I want to thank you very 234 00:10:53,880 --> 00:10:56,440 Speaker 1: much Eric Valcunus, he is our senior E T F 235 00:10:56,480 --> 00:11:04,280 Speaker 1: analyst for Bloomberg Intelligence. Well, the world of fashion has 236 00:11:04,360 --> 00:11:08,040 Speaker 1: changed dramatically, mainly in the way that it is being 237 00:11:08,240 --> 00:11:12,240 Speaker 1: marketed and distributed. Here to talk about that is Rebecca 238 00:11:12,400 --> 00:11:17,720 Speaker 1: and Ory Minkoff. They are co founders of the Rebecca 239 00:11:17,760 --> 00:11:20,280 Speaker 1: Minkoff and Ury Minkoff brands, and they joined us here 240 00:11:20,280 --> 00:11:22,720 Speaker 1: in our Bloomberg eleven three oh studios. Thank you both 241 00:11:22,800 --> 00:11:25,240 Speaker 1: for for being with us. Rebecca, I want to start 242 00:11:25,280 --> 00:11:28,439 Speaker 1: with you, and I want to ask you specifically about 243 00:11:28,520 --> 00:11:32,040 Speaker 1: how you have changed your use of social media over 244 00:11:32,120 --> 00:11:36,719 Speaker 1: the past few years to more directly target your customers 245 00:11:37,040 --> 00:11:40,880 Speaker 1: and frankly bypass big advertisers. I think what's really key, 246 00:11:40,880 --> 00:11:43,599 Speaker 1: and it's something you know started before social media is 247 00:11:43,640 --> 00:11:46,480 Speaker 1: it's always been about my conversation with the consumers. So 248 00:11:46,480 --> 00:11:49,440 Speaker 1: social media has allowed us to continue to have a 249 00:11:49,480 --> 00:11:52,160 Speaker 1: dialogue with her directly. We didn't have to have any 250 00:11:52,160 --> 00:11:54,920 Speaker 1: middleman and so social media is that tool that we use, 251 00:11:54,960 --> 00:11:57,600 Speaker 1: whether it's Instagram or Twitter or Facebook to really just 252 00:11:57,679 --> 00:12:00,680 Speaker 1: talk to her. And uh, you don't to advertise her 253 00:12:00,720 --> 00:12:02,640 Speaker 1: because she's not looking for that anyway. She just wants 254 00:12:02,679 --> 00:12:05,480 Speaker 1: an authentic connection and if I can be that for her, 255 00:12:05,559 --> 00:12:07,720 Speaker 1: then then she's happy and so am I. But have 256 00:12:07,840 --> 00:12:11,200 Speaker 1: you actually cut back on more traditional means of advertising 257 00:12:11,520 --> 00:12:14,480 Speaker 1: as you more directly connect with her. We've actually never 258 00:12:14,520 --> 00:12:17,040 Speaker 1: had to do the traditional advertising route because we had 259 00:12:17,080 --> 00:12:19,640 Speaker 1: that connection early on, so we didn't have to invest, 260 00:12:20,040 --> 00:12:22,880 Speaker 1: you know, hundreds of thousands of ad dollars in glossy magazines. 261 00:12:22,920 --> 00:12:25,320 Speaker 1: I think it was about I know you, you know me, 262 00:12:25,440 --> 00:12:26,960 Speaker 1: and we're going to talk and it's going to be 263 00:12:27,040 --> 00:12:30,240 Speaker 1: authentic and that's more real. Or I want to bring 264 00:12:30,280 --> 00:12:32,680 Speaker 1: you in and just to talk about the actual business 265 00:12:32,880 --> 00:12:37,640 Speaker 1: of fashion. Because in reading a recent issue of Women's 266 00:12:37,679 --> 00:12:40,920 Speaker 1: Where Daily, Uh, there was an issue with one of 267 00:12:40,960 --> 00:12:44,440 Speaker 1: your distribution and supply chain partners, and I thought it 268 00:12:44,520 --> 00:12:47,360 Speaker 1: was interesting the way you handled it was to go 269 00:12:47,480 --> 00:12:50,920 Speaker 1: directly to Facebook and use that as a medium to 270 00:12:51,040 --> 00:12:54,560 Speaker 1: communicate obviously not only with your other business partners, but 271 00:12:54,960 --> 00:12:58,080 Speaker 1: really with your customer base. Yeah, you know in this 272 00:12:58,160 --> 00:13:01,360 Speaker 1: day and age, community is so portant and our customer 273 00:13:01,440 --> 00:13:04,960 Speaker 1: bases is so important to us. UM. We moved to 274 00:13:05,240 --> 00:13:08,920 Speaker 1: a new warehouse, third party logistics warehouse right before the 275 00:13:08,920 --> 00:13:11,760 Speaker 1: holiday season. We also moved to a new web platform 276 00:13:12,440 --> 00:13:15,240 Speaker 1: really to optimize around long term growth UH. And the 277 00:13:15,280 --> 00:13:18,000 Speaker 1: demand for our product was so great that they just 278 00:13:18,000 --> 00:13:20,040 Speaker 1: couldn't keep up with it during the holiday season, and 279 00:13:20,080 --> 00:13:24,200 Speaker 1: so we had some some shipping delays because the expectations 280 00:13:24,280 --> 00:13:27,360 Speaker 1: just we're not there with it was just far outceded 281 00:13:27,440 --> 00:13:30,280 Speaker 1: expectations UM. And it's not a bad problem to have, 282 00:13:30,520 --> 00:13:32,280 Speaker 1: not a bad problem to have, but you know, our 283 00:13:32,320 --> 00:13:35,280 Speaker 1: community is so close to Rebecca and they're so embracive 284 00:13:35,280 --> 00:13:37,160 Speaker 1: of her in the brand UM, and some of them 285 00:13:37,200 --> 00:13:39,680 Speaker 1: felt disappointed. So it's important for Rebecca to God and 286 00:13:39,679 --> 00:13:42,120 Speaker 1: make a statement to them directly and to really sit 287 00:13:42,160 --> 00:13:44,160 Speaker 1: there and answer their questions. And it's something that will 288 00:13:44,320 --> 00:13:48,200 Speaker 1: be continuing to refine. Rebecca. I also ask you about 289 00:13:48,240 --> 00:13:51,920 Speaker 1: the Women's March. I know you have an initiative where 290 00:13:52,280 --> 00:13:55,840 Speaker 1: you are outfitting some of the leaders in the Women's 291 00:13:55,880 --> 00:13:59,560 Speaker 1: March Committee and then in photographs you can click on 292 00:13:59,600 --> 00:14:01,560 Speaker 1: the different things that they're wearing, and it shows you 293 00:14:01,640 --> 00:14:03,920 Speaker 1: how much they are and how you can buy them. 294 00:14:03,960 --> 00:14:07,200 Speaker 1: And I'm just wondering about if this is the first 295 00:14:07,520 --> 00:14:10,760 Speaker 1: sort of cause that you've associated yourself with, how you 296 00:14:10,880 --> 00:14:15,559 Speaker 1: choose causes, and how you do that while not alienating 297 00:14:15,679 --> 00:14:18,640 Speaker 1: any of your customers who might not agree with your cause. 298 00:14:19,240 --> 00:14:22,160 Speaker 1: This is definitely not the first time I've been working 299 00:14:22,200 --> 00:14:24,160 Speaker 1: with a cause. I think, you know, when we had 300 00:14:24,160 --> 00:14:26,880 Speaker 1: our first Sea By Wear in the streets on Green Street, 301 00:14:27,240 --> 00:14:29,880 Speaker 1: there was a lot of social unrest at the time, 302 00:14:29,960 --> 00:14:31,680 Speaker 1: a lot of bombings had just occurred, and I said, 303 00:14:31,680 --> 00:14:33,880 Speaker 1: I can't just have a fashion show, you know, So 304 00:14:33,920 --> 00:14:36,400 Speaker 1: we worked with Not on our Watch. We had as 305 00:14:36,520 --> 00:14:40,040 Speaker 1: incredible graffiti artist do some art on on the back 306 00:14:40,040 --> 00:14:42,040 Speaker 1: of these jackets, and the proceeds went to Not on 307 00:14:42,040 --> 00:14:45,360 Speaker 1: Our Watch. And then last February in our fashion show, 308 00:14:45,360 --> 00:14:48,480 Speaker 1: we worked with UM Girl Rising, so empowering girls in 309 00:14:48,480 --> 00:14:51,280 Speaker 1: different communities. Again worked with an artist and the proceeds 310 00:14:51,320 --> 00:14:54,920 Speaker 1: went to these organizations and UM. My relationship with the 311 00:14:54,920 --> 00:14:57,360 Speaker 1: Women's March actually started last year when they reached out, 312 00:14:57,400 --> 00:14:59,960 Speaker 1: they said, we want a uniform. Is there any way 313 00:15:00,160 --> 00:15:02,240 Speaker 1: you know, it's like two days before the march. Do 314 00:15:02,280 --> 00:15:04,200 Speaker 1: you have any shoes or bags that could make us 315 00:15:04,240 --> 00:15:07,080 Speaker 1: all look the same. And I said, hell, yes, um, 316 00:15:07,440 --> 00:15:10,920 Speaker 1: you're like, absolutely, I do my wardrobes done someone to 317 00:15:10,960 --> 00:15:14,280 Speaker 1: the warehouse, Um, and you know, I was really proud 318 00:15:14,280 --> 00:15:16,360 Speaker 1: that I was able to support them with something small 319 00:15:17,120 --> 00:15:19,520 Speaker 1: that you know, made them feel really empowered that day. 320 00:15:19,560 --> 00:15:21,720 Speaker 1: So you know, this year in Louis of a fashion show, 321 00:15:21,720 --> 00:15:24,720 Speaker 1: because I am due during fashion week with my third child, 322 00:15:25,160 --> 00:15:27,760 Speaker 1: I said, how can I really do something that's impactful again? 323 00:15:28,400 --> 00:15:30,520 Speaker 1: And I reached out to the organizers said I would 324 00:15:30,520 --> 00:15:33,280 Speaker 1: love to profile tell your stories and for me, it's 325 00:15:33,320 --> 00:15:35,840 Speaker 1: about female equality and empowerment and if someone has an 326 00:15:35,840 --> 00:15:37,880 Speaker 1: issue with that, then I don't frankly want them to 327 00:15:37,920 --> 00:15:40,640 Speaker 1: be my customer. Well, I guess with the issue being 328 00:15:40,640 --> 00:15:44,560 Speaker 1: that sometimes you know, it's increasingly taken a more political totally, 329 00:15:45,040 --> 00:15:48,040 Speaker 1: so perhaps the insinuation there is what people would object to, 330 00:15:48,080 --> 00:15:51,280 Speaker 1: not necessarily women's empowerment totally. And um. We also made 331 00:15:51,280 --> 00:15:54,880 Speaker 1: a significant donation to support their book launch and the 332 00:15:54,880 --> 00:15:57,680 Speaker 1: Women's March. In general, speak if you can about the 333 00:15:57,760 --> 00:16:01,880 Speaker 1: influencers that exist on line in the world of social media, 334 00:16:01,960 --> 00:16:04,720 Speaker 1: because that is also changing the whole way in which 335 00:16:04,920 --> 00:16:10,720 Speaker 1: buyers interact with you as the creative element, because not 336 00:16:10,880 --> 00:16:13,960 Speaker 1: necessarily to go to a runway show, for example, if 337 00:16:13,960 --> 00:16:16,280 Speaker 1: you have the right influencers or people that are able 338 00:16:16,280 --> 00:16:19,160 Speaker 1: to put up the photographs or their comments on Instagram 339 00:16:19,240 --> 00:16:22,640 Speaker 1: or Facebook, have you found that that is better in 340 00:16:22,680 --> 00:16:26,400 Speaker 1: many ways? You know, Ori and I started working with influencers. 341 00:16:26,440 --> 00:16:29,480 Speaker 1: In the very beginning, we had interventions, people telling us 342 00:16:29,600 --> 00:16:32,120 Speaker 1: you're working with Cless celebrities, You're going to ruin your 343 00:16:32,160 --> 00:16:35,200 Speaker 1: brand with these people, and we really decided to be 344 00:16:35,240 --> 00:16:37,760 Speaker 1: fearless and not listen to them. And I think it 345 00:16:37,880 --> 00:16:40,120 Speaker 1: was about, again, how do you get these people that 346 00:16:40,200 --> 00:16:43,960 Speaker 1: have great communities, great people that follow them and and 347 00:16:44,080 --> 00:16:47,320 Speaker 1: have it again a genuine connection. So I think we 348 00:16:47,360 --> 00:16:50,800 Speaker 1: talked about the influencers that you know, convert to sales, 349 00:16:50,880 --> 00:16:53,320 Speaker 1: the some that also just get you brand recognition, but 350 00:16:53,400 --> 00:16:55,040 Speaker 1: it still has to be authentic at the end of 351 00:16:55,040 --> 00:16:59,160 Speaker 1: the day. It's so powerful today the relationship between you know, 352 00:16:59,200 --> 00:17:01,960 Speaker 1: the influencers and their consumers and their followers and our 353 00:17:02,000 --> 00:17:05,040 Speaker 1: relationship with them, um and that's how you build community 354 00:17:05,040 --> 00:17:08,080 Speaker 1: in this new digital day and age. And those influencers 355 00:17:08,119 --> 00:17:11,840 Speaker 1: don't necessarily have to beat celebrities in a more traditional 356 00:17:12,359 --> 00:17:15,680 Speaker 1: sense of the word even better if they're not really Yeah, 357 00:17:15,800 --> 00:17:19,320 Speaker 1: I think, I think, you know, there's there's this authenticity, 358 00:17:19,600 --> 00:17:22,159 Speaker 1: there's this you know, growing up, you always had you know, 359 00:17:22,200 --> 00:17:24,240 Speaker 1: the person next door that looked great, right, Well, not 360 00:17:24,359 --> 00:17:27,520 Speaker 1: that person next door has millions of people following them, 361 00:17:27,520 --> 00:17:29,520 Speaker 1: and they're known for their style and their discovery and 362 00:17:29,520 --> 00:17:32,480 Speaker 1: how they go through their life. And people are reacting 363 00:17:32,520 --> 00:17:35,440 Speaker 1: against the glossy everything is perfect. They want to know, 364 00:17:36,040 --> 00:17:38,000 Speaker 1: you know, what that person's life is like and their 365 00:17:38,040 --> 00:17:40,080 Speaker 1: ups and their downs, and these people are are sharing them. 366 00:17:40,119 --> 00:17:43,720 Speaker 1: So it's this live reality TV version of of really 367 00:17:43,720 --> 00:17:47,800 Speaker 1: cool people online. And these communities leverage in the millions 368 00:17:48,000 --> 00:17:50,720 Speaker 1: and so and even now we're seeing a trend even 369 00:17:50,760 --> 00:17:53,240 Speaker 1: away from macro influencers towards micro influencers, where you have 370 00:17:53,320 --> 00:17:55,840 Speaker 1: people that have followings of five or ten thousand, and 371 00:17:55,880 --> 00:17:58,639 Speaker 1: their communities are so engaged that they'll literally follow them 372 00:17:58,640 --> 00:18:01,399 Speaker 1: to the ends of the earth. So we run campaigns 373 00:18:01,400 --> 00:18:05,399 Speaker 1: and work with influences, you know, macro micro all the time, 374 00:18:05,480 --> 00:18:07,959 Speaker 1: and and and when we find an influencer that has 375 00:18:07,960 --> 00:18:11,479 Speaker 1: an authentic connection to the brand, an authentic community, we 376 00:18:11,520 --> 00:18:13,560 Speaker 1: all just grow together. I love this idea of many 377 00:18:13,640 --> 00:18:17,320 Speaker 1: cults kind of propping up on different social media platforms. 378 00:18:17,320 --> 00:18:19,719 Speaker 1: And we noticed that one of your bags has a 379 00:18:19,840 --> 00:18:23,800 Speaker 1: sponsored icon next to it on Amazon, and it raises 380 00:18:23,800 --> 00:18:27,640 Speaker 1: this question of how you use Amazon? Does that mean 381 00:18:27,880 --> 00:18:32,960 Speaker 1: that you can pay them for better placement? Um? How 382 00:18:32,960 --> 00:18:35,720 Speaker 1: has it kind of changed the way you go about things? 383 00:18:36,560 --> 00:18:40,919 Speaker 1: So we do not sell directly to Amazon our bags. 384 00:18:41,080 --> 00:18:44,199 Speaker 1: Um we did in the past. Uh. And we we 385 00:18:44,359 --> 00:18:49,680 Speaker 1: decided to not work with them directly. Uh simply because, um, 386 00:18:49,720 --> 00:18:51,480 Speaker 1: you know, there's a lot of discounting and so forth, 387 00:18:51,520 --> 00:18:53,560 Speaker 1: and it was important to us to keep the integrity 388 00:18:54,440 --> 00:18:57,920 Speaker 1: of respecting the full price window is the full price window. Um, 389 00:18:58,000 --> 00:19:01,920 Speaker 1: So we opted out of that direct relationship Amazon does. 390 00:19:02,200 --> 00:19:03,880 Speaker 1: Just to be real clear there. So in other words, 391 00:19:03,880 --> 00:19:07,240 Speaker 1: you were saying that they wanted you to discount your 392 00:19:07,240 --> 00:19:10,720 Speaker 1: bag in order to give them part of the profit, 393 00:19:10,800 --> 00:19:13,119 Speaker 1: or because they thought that it would be in the 394 00:19:13,160 --> 00:19:16,080 Speaker 1: past successful. In the past, we had a wholesale retail 395 00:19:16,119 --> 00:19:19,040 Speaker 1: relationship with them. But obviously they could they could set 396 00:19:19,040 --> 00:19:22,680 Speaker 1: their pricing. It's it's illegal in the US to dictate pricing. Um. 397 00:19:22,800 --> 00:19:24,960 Speaker 1: And but we found that but you could choose not 398 00:19:25,040 --> 00:19:27,800 Speaker 1: to sell to somebody um and we found that we 399 00:19:27,800 --> 00:19:31,439 Speaker 1: couldn't get them to respect our pricing windows um and 400 00:19:31,440 --> 00:19:34,120 Speaker 1: and and with that regard, we chose to not continue 401 00:19:34,119 --> 00:19:37,920 Speaker 1: a business relationship with them for our bags. That being said, 402 00:19:38,200 --> 00:19:41,200 Speaker 1: they have a large marketplace, so any third party person 403 00:19:41,320 --> 00:19:44,120 Speaker 1: can set up a store and go sell on that marketplace, 404 00:19:44,160 --> 00:19:47,000 Speaker 1: whether they're an individual, they could do fulfilled by Amazon 405 00:19:47,080 --> 00:19:49,600 Speaker 1: and it can be marketed to Prime members. So for 406 00:19:49,680 --> 00:19:53,040 Speaker 1: the end consumer, it gets very confusing of whether there's 407 00:19:53,080 --> 00:19:55,800 Speaker 1: an authentic relationship with the brand or whether someone bought 408 00:19:55,840 --> 00:19:59,040 Speaker 1: a bag somewhere and it's frankly reselling it. So whatever 409 00:19:59,520 --> 00:20:02,840 Speaker 1: you're buying there of current goods is mostly through you know, 410 00:20:02,880 --> 00:20:05,280 Speaker 1: a reseller doing it rather than us having a direct 411 00:20:05,280 --> 00:20:10,000 Speaker 1: connection with Amazon. Today, Rebecca, you are ahead of the 412 00:20:10,040 --> 00:20:12,440 Speaker 1: curve in so many ways, and it seems as though 413 00:20:12,440 --> 00:20:14,199 Speaker 1: you're at least three years early when it comes to 414 00:20:14,280 --> 00:20:16,720 Speaker 1: virtual reality. You know, virtual reality is sort of the 415 00:20:16,720 --> 00:20:21,439 Speaker 1: big buzzword right now, or artificial intelligence and enhanced reality 416 00:20:21,480 --> 00:20:25,240 Speaker 1: and so on. But going back to September off you 417 00:20:25,280 --> 00:20:29,200 Speaker 1: were offering virtual reality headsets so that people could actually 418 00:20:29,280 --> 00:20:33,119 Speaker 1: see some of your shows using their I phone. I 419 00:20:33,119 --> 00:20:35,679 Speaker 1: think it's important, um word I like to take risks 420 00:20:35,920 --> 00:20:39,520 Speaker 1: in this space, and because of his technology background, he 421 00:20:39,600 --> 00:20:43,159 Speaker 1: likes to take even larger risks and feels confident doing so. 422 00:20:43,200 --> 00:20:45,400 Speaker 1: And I think any risk that he proposed, by any 423 00:20:45,520 --> 00:20:51,520 Speaker 1: chance that you have shot down. Yeah, there were a 424 00:20:51,560 --> 00:20:54,520 Speaker 1: couple and I hadn't want to do that backfired. What 425 00:20:54,600 --> 00:20:57,760 Speaker 1: you learned from details? You know, I think I think 426 00:20:57,840 --> 00:21:01,400 Speaker 1: it's important to understand who your partner are. Obviously we're 427 00:21:01,400 --> 00:21:03,840 Speaker 1: not a technology company, so it's it's really vetting the 428 00:21:03,880 --> 00:21:06,119 Speaker 1: partners and can they deliver on time and can they 429 00:21:06,160 --> 00:21:08,320 Speaker 1: support you? And what we found is that there are 430 00:21:08,359 --> 00:21:11,399 Speaker 1: some amazing startups um and you get this one on 431 00:21:11,400 --> 00:21:13,879 Speaker 1: one attention, or sometimes there's very large corporations and they 432 00:21:13,880 --> 00:21:16,840 Speaker 1: have internal support. So we figured out what works. Um. 433 00:21:16,880 --> 00:21:19,480 Speaker 1: I think, you know, one to tell people what it 434 00:21:19,520 --> 00:21:20,960 Speaker 1: gives people a hint so they don't have to go 435 00:21:21,000 --> 00:21:23,719 Speaker 1: through the same pain in agony. Hint in terms of 436 00:21:24,160 --> 00:21:26,280 Speaker 1: what to avoid, what to avoid, you know, I think 437 00:21:26,359 --> 00:21:29,720 Speaker 1: one time, always listen to your sister. Sometimes listen to 438 00:21:29,800 --> 00:21:35,080 Speaker 1: your sister as someone with an older brother. UM No, 439 00:21:35,200 --> 00:21:37,560 Speaker 1: I think I think one time we we decided to 440 00:21:37,680 --> 00:21:42,040 Speaker 1: encourage um. You know, a live feed of sorts during 441 00:21:42,080 --> 00:21:45,360 Speaker 1: a live presentation, and and and sometimes when you do that, 442 00:21:46,119 --> 00:21:49,320 Speaker 1: you get you get some people that have um ulterior 443 00:21:49,400 --> 00:21:52,840 Speaker 1: purposes or motives and threw up some inappropriate content during 444 00:21:52,840 --> 00:21:55,800 Speaker 1: a live experience. So my sister suggested, Hey, maybe we 445 00:21:55,800 --> 00:21:57,880 Speaker 1: shouldn't do this, and I was like, no, I got 446 00:21:57,920 --> 00:22:01,359 Speaker 1: this and I didn't have it um. But fortunately everything 447 00:22:01,400 --> 00:22:04,360 Speaker 1: else has has worked out. I think with the virtual reality, 448 00:22:04,800 --> 00:22:07,560 Speaker 1: as you said though, it's fascinating because I think, whether 449 00:22:07,560 --> 00:22:10,399 Speaker 1: it's three or five years from now, you'll be sitting 450 00:22:10,440 --> 00:22:12,600 Speaker 1: in your apartment or you'll be sitting in a city 451 00:22:12,600 --> 00:22:15,359 Speaker 1: that doesn't have, you know, a Bergdorf Goodman or a 452 00:22:15,359 --> 00:22:18,840 Speaker 1: Becka Minkoff store, and you'll feel like you're live walking 453 00:22:18,880 --> 00:22:22,000 Speaker 1: through there, um and and and we think that's an 454 00:22:22,000 --> 00:22:23,840 Speaker 1: experience of the future, and we just wanted to start 455 00:22:23,840 --> 00:22:25,639 Speaker 1: playing with it. So this is this raise is a 456 00:22:25,640 --> 00:22:28,919 Speaker 1: really key question. Is brick and mortar dead? It's definitely 457 00:22:29,000 --> 00:22:31,159 Speaker 1: not dead. I think it's just changing, and it's changing 458 00:22:31,240 --> 00:22:33,720 Speaker 1: very quickly. I think if you're going to get someone 459 00:22:33,760 --> 00:22:35,520 Speaker 1: to get out of their pajamas and get up off 460 00:22:35,560 --> 00:22:37,600 Speaker 1: the couch, what are you going to give them in 461 00:22:37,640 --> 00:22:40,120 Speaker 1: a brick and mortar store. You're making us sound so 462 00:22:40,200 --> 00:22:44,720 Speaker 1: lazy if you're gonna get act, can we just talk 463 00:22:45,000 --> 00:22:47,240 Speaker 1: in that context. Can we just talk money for for 464 00:22:47,320 --> 00:22:51,800 Speaker 1: a second, because the cost of commercial real estate is 465 00:22:51,800 --> 00:22:54,720 Speaker 1: no joke, and if you're running a retail operation, it 466 00:22:54,880 --> 00:22:58,919 Speaker 1: is a major cost. Have you seen changes in the 467 00:22:59,000 --> 00:23:02,359 Speaker 1: in the price that the landlords looking to charge you. 468 00:23:02,640 --> 00:23:06,880 Speaker 1: We're seeing more favorable rates, um, much more favorable rates 469 00:23:06,920 --> 00:23:10,000 Speaker 1: with landlords and they're willing to also test stuff out now. 470 00:23:10,119 --> 00:23:13,720 Speaker 1: So I think for us, it's about we have fireside chats, 471 00:23:13,760 --> 00:23:17,320 Speaker 1: we have community events, we have Forbes book Club, so 472 00:23:17,359 --> 00:23:20,760 Speaker 1: we're constantly doing things to get people together off their 473 00:23:20,800 --> 00:23:23,119 Speaker 1: phones in the store. And if you don't buy anything 474 00:23:23,160 --> 00:23:25,000 Speaker 1: that night, it's totally fine. We just want you to 475 00:23:25,000 --> 00:23:27,520 Speaker 1: connect and come away learning something. I think what we're 476 00:23:27,520 --> 00:23:30,280 Speaker 1: seeing is that, you know, it isn't it isn't all. 477 00:23:30,400 --> 00:23:33,680 Speaker 1: It's when we create community and we create events. Yes, 478 00:23:33,720 --> 00:23:36,159 Speaker 1: there's the transaction in the store, but a lot of 479 00:23:36,200 --> 00:23:40,200 Speaker 1: those people are then creating content and that content lives online, 480 00:23:40,240 --> 00:23:42,800 Speaker 1: lives on mobile lives and apps, and then you're seeing 481 00:23:42,840 --> 00:23:46,080 Speaker 1: a spike in online sales. Right. It's it's the phone, 482 00:23:46,240 --> 00:23:48,199 Speaker 1: It's the fear of missing out. It's we had this 483 00:23:48,280 --> 00:23:52,240 Speaker 1: amazing experience with Rebecca uh and a female leader, and 484 00:23:52,280 --> 00:23:54,000 Speaker 1: all of a sudden, it's the people that weren't there 485 00:23:54,240 --> 00:23:55,800 Speaker 1: that kind of want to be there, and we're seeing 486 00:23:55,840 --> 00:23:57,960 Speaker 1: those sales start to spike as a result of these 487 00:23:58,000 --> 00:24:00,920 Speaker 1: micro events that we do. So brick and mortar isn't dead, 488 00:24:00,960 --> 00:24:03,320 Speaker 1: but that brick and mortar better be pretty darn cool 489 00:24:03,560 --> 00:24:05,520 Speaker 1: to get people. And it might be less expensive, and 490 00:24:05,520 --> 00:24:07,880 Speaker 1: it might be less expensive, it might be more temporary, 491 00:24:07,920 --> 00:24:11,400 Speaker 1: it might be outfitted in different ways. Fascinating conversation. Thank 492 00:24:11,440 --> 00:24:14,640 Speaker 1: you both so much for being with us, and congratulations 493 00:24:14,720 --> 00:24:18,199 Speaker 1: on your soon to be addition, Rebecca. Rebecca Minkoff and 494 00:24:18,400 --> 00:24:22,960 Speaker 1: Orri Minkoff, co founders of the Rebecca Minkoff and the 495 00:24:23,119 --> 00:24:25,600 Speaker 1: or Minkoff Line, which is the Men's Line. Thank you 496 00:24:25,600 --> 00:24:29,960 Speaker 1: so much for joining us here. You're listening to Bloomberg 497 00:24:30,040 --> 00:24:34,200 Speaker 1: Markets with Pim Fox and Lisa Abramowitz on Bloomberg Radio. 498 00:24:34,680 --> 00:24:38,760 Speaker 1: There was a legal question that emerged after Steve Bannon's 499 00:24:38,760 --> 00:24:43,080 Speaker 1: testimony in front of Congress recently, where he invoked executive 500 00:24:43,080 --> 00:24:47,040 Speaker 1: privilege for not talking about some of his experiences with 501 00:24:47,080 --> 00:24:49,880 Speaker 1: President Trump. Here to talk about. That is Noah Feldman 502 00:24:50,160 --> 00:24:53,960 Speaker 1: Felix Frankfurter, Professor of law at Harvard University. He's also 503 00:24:54,000 --> 00:24:57,800 Speaker 1: a Bloomberg View columnist, and he comes to us from Boston. Noah, 504 00:24:57,880 --> 00:25:01,000 Speaker 1: thank you so much for being with us. You know there, 505 00:25:01,400 --> 00:25:03,879 Speaker 1: just if we want to back up here, there is 506 00:25:03,920 --> 00:25:08,560 Speaker 1: a perception that some of the claims being used by 507 00:25:08,680 --> 00:25:12,680 Speaker 1: the Trump administration are sort of on the fringes of law. 508 00:25:12,720 --> 00:25:17,680 Speaker 1: And certainly Steve Bannon's claim of executive privilege, uh, covering 509 00:25:17,680 --> 00:25:21,960 Speaker 1: the time before President Trump even became president that protected 510 00:25:22,080 --> 00:25:25,639 Speaker 1: him and his conversations, uh, sort of goes over the 511 00:25:25,720 --> 00:25:28,320 Speaker 1: line you ought to column about this. Can you explain 512 00:25:28,680 --> 00:25:33,520 Speaker 1: why it may not? Sure? The basic idea of the 513 00:25:33,560 --> 00:25:36,560 Speaker 1: executive privilege is that the president should be able to 514 00:25:36,560 --> 00:25:39,840 Speaker 1: talk to his senior most advisers in a way that 515 00:25:39,920 --> 00:25:42,520 Speaker 1: won't substantly be revealed to the world. And I think 516 00:25:42,520 --> 00:25:44,520 Speaker 1: most of us agree that that's in general a good principle, 517 00:25:44,520 --> 00:25:47,720 Speaker 1: and it has some basis in the Constitution insofar as 518 00:25:47,960 --> 00:25:51,080 Speaker 1: the president has powers, including his foreign affairs powers, that 519 00:25:51,080 --> 00:25:54,919 Speaker 1: he's supposed to exercise in his own terms. The question 520 00:25:55,040 --> 00:25:57,879 Speaker 1: is when the president is not yet the president should 521 00:25:57,880 --> 00:26:00,879 Speaker 1: he be able to take advantage of the privilege. And 522 00:26:00,880 --> 00:26:02,520 Speaker 1: if you think of it's solely in terms of the 523 00:26:02,560 --> 00:26:05,919 Speaker 1: fact that he is president when he exercises the privilege, 524 00:26:05,920 --> 00:26:08,119 Speaker 1: and the answer is no, because there's only one president 525 00:26:08,160 --> 00:26:10,120 Speaker 1: at the time, and during the transition of Barack Obama 526 00:26:10,160 --> 00:26:12,000 Speaker 1: was president. But if you think of it in terms 527 00:26:12,040 --> 00:26:14,880 Speaker 1: of the job that the president actually needs to do, 528 00:26:15,440 --> 00:26:18,359 Speaker 1: that job begins after he's elected and before he's in auguent. 529 00:26:18,440 --> 00:26:20,600 Speaker 1: He has to choose his most senior advisers, he has 530 00:26:20,680 --> 00:26:23,520 Speaker 1: to talk about he gets briefed by officials from the 531 00:26:23,560 --> 00:26:26,479 Speaker 1: pre existing administration. There's plenty there that we would not 532 00:26:26,560 --> 00:26:29,080 Speaker 1: want the world to necessarily be able to hear. So 533 00:26:29,119 --> 00:26:31,280 Speaker 1: if you see it purely in functional terms, there may 534 00:26:31,320 --> 00:26:36,080 Speaker 1: be some reason to extend the privilege cautiously to the transition. No, uh, 535 00:26:36,119 --> 00:26:39,400 Speaker 1: I wonder if you could describe what is the sort 536 00:26:39,400 --> 00:26:46,359 Speaker 1: of modus operandi here of having abandon, testify or indeed deposed, 537 00:26:46,400 --> 00:26:50,000 Speaker 1: let's say, by Robert Mueller and the investigation, Because isn't 538 00:26:50,040 --> 00:26:52,879 Speaker 1: this really just about what action happened. It's not about 539 00:26:52,880 --> 00:26:56,600 Speaker 1: who said what to whom, It's about what actually happened. 540 00:26:57,720 --> 00:27:00,640 Speaker 1: That's true we probably don't want to divide public hearing 541 00:27:00,640 --> 00:27:04,520 Speaker 1: in front of Congress from a private conversation with an 542 00:27:04,520 --> 00:27:06,399 Speaker 1: official of the Department of Justice, And in fact, the 543 00:27:06,440 --> 00:27:09,560 Speaker 1: courts have treated those differently. Um, when it comes to 544 00:27:09,960 --> 00:27:14,360 Speaker 1: a conversation with Mueller, if Mueller issues a subpoena, then 545 00:27:14,440 --> 00:27:16,600 Speaker 1: there's good solid Supreme Court President going all the way 546 00:27:16,640 --> 00:27:19,399 Speaker 1: back to the nixt and Watergate TPS case, which says 547 00:27:19,720 --> 00:27:22,840 Speaker 1: that any interest of president has some confidentiality is going 548 00:27:22,920 --> 00:27:26,520 Speaker 1: to be overridden by the need of the Department of 549 00:27:26,560 --> 00:27:29,200 Speaker 1: Justice and of the courts ultimately to get the fact 550 00:27:29,240 --> 00:27:31,639 Speaker 1: in a criminal investigation, and that conversation is going to 551 00:27:31,720 --> 00:27:36,040 Speaker 1: be inevitably about whether laws were broken, and that's gonna trump. 552 00:27:36,359 --> 00:27:38,439 Speaker 1: On the other hand, a congressional inquirer can go a 553 00:27:38,440 --> 00:27:41,199 Speaker 1: lot further because Congress is not merely investigating where there 554 00:27:41,240 --> 00:27:43,680 Speaker 1: was wrongdoing, but also what happened, you know, how was 555 00:27:43,760 --> 00:27:46,320 Speaker 1: foreign policy made, what was said, and who was speaking. 556 00:27:46,359 --> 00:27:49,840 Speaker 1: And unlike a lawyer who's asking questions under conditions of 557 00:27:49,840 --> 00:27:53,479 Speaker 1: a criminal case, a congress person can ask almost anything 558 00:27:53,480 --> 00:27:56,080 Speaker 1: in the course of a h an investigation, in the 559 00:27:56,080 --> 00:27:58,800 Speaker 1: course of a of a hearing, and their interest is 560 00:27:58,840 --> 00:28:00,800 Speaker 1: in politics, not only in and who broke the law, 561 00:28:00,800 --> 00:28:03,280 Speaker 1: and that could potentially be be further reaching, and there's 562 00:28:03,280 --> 00:28:05,520 Speaker 1: a different legal regime governing it because that's about a 563 00:28:05,560 --> 00:28:08,280 Speaker 1: conflict between Congress and the president rather than between the 564 00:28:08,320 --> 00:28:10,880 Speaker 1: judiciary and the precedent. Well, no, maybe then you can 565 00:28:10,920 --> 00:28:14,200 Speaker 1: offer your thoughts because you've written a variety of books, 566 00:28:14,240 --> 00:28:15,920 Speaker 1: the most recent of one is The Three Lives of 567 00:28:16,000 --> 00:28:21,040 Speaker 1: James Madison, Genius, Partisan and President. And at what point 568 00:28:21,160 --> 00:28:26,000 Speaker 1: does all of this become such inside baseball that uh, 569 00:28:26,359 --> 00:28:29,160 Speaker 1: you know, investors look at it and go all right, 570 00:28:29,320 --> 00:28:32,320 Speaker 1: So we'll let the legal system run its course, but 571 00:28:32,640 --> 00:28:35,320 Speaker 1: that's not really going to affect what happens in terms 572 00:28:35,320 --> 00:28:38,000 Speaker 1: of Washington because at least right now, nothing's happening and 573 00:28:38,200 --> 00:28:41,800 Speaker 1: we can't even get a budget. Well, look, I totally 574 00:28:41,840 --> 00:28:44,440 Speaker 1: agree that there does be an extraordinary degree of conflict 575 00:28:44,560 --> 00:28:46,840 Speaker 1: going on, and that's the luckily the job of the 576 00:28:46,840 --> 00:28:49,120 Speaker 1: politicians to sort out, and I think the market group 577 00:28:49,240 --> 00:28:52,160 Speaker 1: generally leave that to the politicians. Here, we really should 578 00:28:52,200 --> 00:28:55,719 Speaker 1: clearly distinguish two things. One is the criminal investigation of 579 00:28:55,760 --> 00:28:58,800 Speaker 1: the president and his associates, which is ongoing. Mueller will 580 00:28:58,800 --> 00:29:02,240 Speaker 1: engage in the most aggressive of lawful ethical investigation that 581 00:29:02,240 --> 00:29:04,440 Speaker 1: that he can engage in, and it's important to understend 582 00:29:04,480 --> 00:29:07,680 Speaker 1: that that will include being able to question Bannon about 583 00:29:07,800 --> 00:29:10,680 Speaker 1: anything that Bannon may have seen or heard that would 584 00:29:10,680 --> 00:29:13,560 Speaker 1: cross the line into illegal conduct. And no claim of 585 00:29:13,560 --> 00:29:16,680 Speaker 1: executive village is going to defend uh the executive branch 586 00:29:16,840 --> 00:29:20,640 Speaker 1: or Bannon or President Trump against that. Separately, there's a 587 00:29:20,720 --> 00:29:24,959 Speaker 1: question of the struggle, the two years struggle between Congress 588 00:29:24,960 --> 00:29:27,240 Speaker 1: and the president over who gets to keep what's secret, 589 00:29:27,240 --> 00:29:28,760 Speaker 1: and there I think you're right to see this as 590 00:29:29,080 --> 00:29:32,240 Speaker 1: kind of inside baseball wrangling with the presidents. He trying 591 00:29:32,240 --> 00:29:33,920 Speaker 1: to say as little as possible, in Congress trying to 592 00:29:33,920 --> 00:29:35,920 Speaker 1: find out as much as possible, And in fact, our 593 00:29:35,960 --> 00:29:39,240 Speaker 1: system expects that to be worked out by negotiations. Unfortunately, 594 00:29:39,240 --> 00:29:41,640 Speaker 1: in our current era, negotiation between the two sides is 595 00:29:41,680 --> 00:29:44,440 Speaker 1: harder than it's than it's ever been. But that's nevertheless 596 00:29:44,480 --> 00:29:46,040 Speaker 1: the way our system is set up. Congress and the 597 00:29:46,080 --> 00:29:48,760 Speaker 1: President are supposed to work this out amongst themselves. You know, 598 00:29:48,800 --> 00:29:52,400 Speaker 1: there's a lot of talk right now about you know, well, 599 00:29:52,680 --> 00:29:54,960 Speaker 1: there's by us on both sides. There's by us in 600 00:29:54,960 --> 00:29:57,760 Speaker 1: the part of Muller and his team there's by us 601 00:29:57,760 --> 00:30:00,400 Speaker 1: in the part of the FBI, UH and and people 602 00:30:00,520 --> 00:30:04,400 Speaker 1: saying that that these investigations need to go on because 603 00:30:04,600 --> 00:30:08,000 Speaker 1: President Trump has engaged in some behavior or may have 604 00:30:08,280 --> 00:30:12,800 Speaker 1: that is problematic. I'm just wondering, from a legal perspective, 605 00:30:13,520 --> 00:30:17,680 Speaker 1: does the partisan bickering has it sort of reached in 606 00:30:17,760 --> 00:30:20,920 Speaker 1: and muddied the legal waters yet? Have there been any 607 00:30:21,000 --> 00:30:24,120 Speaker 1: moves made that undermine the legal integrity going on here? 608 00:30:24,880 --> 00:30:28,000 Speaker 1: Not yet. I would say that right now. Within the 609 00:30:28,080 --> 00:30:31,760 Speaker 1: legal community broadly, and I'm talking about lawyers, judges to 610 00:30:31,840 --> 00:30:36,000 Speaker 1: some degree when they speak off the record, um legal experts, 611 00:30:36,240 --> 00:30:39,000 Speaker 1: the general perception very strongly is that Mueller and his 612 00:30:39,080 --> 00:30:43,480 Speaker 1: team are seasoned, experienced prosecutors who are as objective as 613 00:30:43,560 --> 00:30:45,600 Speaker 1: human beings are able to be. I think there's a 614 00:30:45,600 --> 00:30:47,760 Speaker 1: strong belief that if there's nothing to be shown in 615 00:30:47,800 --> 00:30:50,040 Speaker 1: the investigation, Muller and his team will say there's nothing 616 00:30:50,040 --> 00:30:51,880 Speaker 1: to be shown, that if there are crimes, they will 617 00:30:51,880 --> 00:30:53,880 Speaker 1: reveal them, and whatever their nature is, they will they 618 00:30:53,920 --> 00:30:56,720 Speaker 1: will pursue them. I think the political screen is seen 619 00:30:56,720 --> 00:30:59,640 Speaker 1: as attempting to shape and effect the process of that 620 00:31:00,000 --> 00:31:04,240 Speaker 1: investigation that has not yet happened. I think that of 621 00:31:04,280 --> 00:31:06,640 Speaker 1: course that's a possibility, but it remains not the case 622 00:31:07,000 --> 00:31:09,880 Speaker 1: to this moment. I think, you know, we got Unfortunately, 623 00:31:09,880 --> 00:31:12,360 Speaker 1: we gotta leave it there. We've gotta run. Noah Feldman 624 00:31:12,560 --> 00:31:15,560 Speaker 1: is the Felix Frankfurter Professor of Law at Harvard University 625 00:31:15,880 --> 00:31:18,760 Speaker 1: and a Bloomberg View columnist. He can be followed on 626 00:31:18,800 --> 00:31:24,520 Speaker 1: Twitter at Noah R. Feldman. You're listening to Bloomberg Markets 627 00:31:24,680 --> 00:31:29,240 Speaker 1: with them Fox and Lisa Abramowitz on Bloomberg Radio. Bloomberg 628 00:31:29,240 --> 00:31:32,160 Speaker 1: Markets brought you by Bild. America Mutual BAM has ensured 629 00:31:32,200 --> 00:31:35,320 Speaker 1: more than forty billion dollars of municipal bonds for essential 630 00:31:35,400 --> 00:31:38,920 Speaker 1: public projects across the US. They're high double A credit 631 00:31:39,000 --> 00:31:43,520 Speaker 1: rating from SMP helps infrastructure infrastructure dollars go further, Build 632 00:31:43,600 --> 00:31:48,200 Speaker 1: America dot Com BAM. Well, right now we are hearing 633 00:31:48,360 --> 00:31:52,200 Speaker 1: a lot of comparisons drawn between President Trump of the 634 00:31:52,360 --> 00:31:57,400 Speaker 1: US and President Jean Ping of China, and that will 635 00:31:57,440 --> 00:32:00,920 Speaker 1: only get ramped up next week as we have the 636 00:32:01,000 --> 00:32:04,920 Speaker 1: Davos World Economic Forum Annual Shindig, and here to talk 637 00:32:04,960 --> 00:32:08,080 Speaker 1: about really some of the comparisons and perhaps the h 638 00:32:08,920 --> 00:32:11,960 Speaker 1: the misimpressions are the false impressions that some people are 639 00:32:12,040 --> 00:32:15,480 Speaker 1: getting is Elizabeth Economy. She's cv STAR Senior Fellow and 640 00:32:15,560 --> 00:32:19,360 Speaker 1: Director for Asia Studies for the Council of Foreign Relations, 641 00:32:19,360 --> 00:32:21,920 Speaker 1: and she joins us. Now, Elizabeth, thank you so much 642 00:32:22,040 --> 00:32:24,240 Speaker 1: for being with us. I wanted to touch base with 643 00:32:24,320 --> 00:32:28,800 Speaker 1: you because there is this impression that President Jim Ping 644 00:32:28,880 --> 00:32:33,440 Speaker 1: of China is kind of taking that nation to the 645 00:32:33,480 --> 00:32:39,040 Speaker 1: forefront of global domination and managing global affairs and frankly 646 00:32:39,640 --> 00:32:42,680 Speaker 1: best in the US in some ways, as President Trump 647 00:32:42,760 --> 00:32:45,680 Speaker 1: sort of takes more of a protectionist stance. Do you 648 00:32:45,760 --> 00:32:49,560 Speaker 1: think that people are getting the wrong impression? I do, 649 00:32:49,760 --> 00:32:52,360 Speaker 1: and and thanks for having me. Um. I think it 650 00:32:52,400 --> 00:32:55,520 Speaker 1: is certainly true that President Trump has taken a step 651 00:32:55,560 --> 00:32:59,600 Speaker 1: back from the traditional role of the United States as 652 00:32:59,640 --> 00:33:02,280 Speaker 1: globe leader. There's no doubt about it. We've seen him, 653 00:33:02,280 --> 00:33:06,080 Speaker 1: you know, withdraw from the proposed Transpacific Partnership, take a 654 00:33:06,080 --> 00:33:11,280 Speaker 1: step back certainly on climate change, on various United Nations initiatives, 655 00:33:11,480 --> 00:33:16,160 Speaker 1: and obviously in terms of migration UH and immigration issues. UM. 656 00:33:16,240 --> 00:33:18,440 Speaker 1: But that is not to say that simply because the 657 00:33:18,520 --> 00:33:22,360 Speaker 1: United States is somewhat in retreat, that China is ready 658 00:33:22,400 --> 00:33:26,080 Speaker 1: to assume the mantle of global leadership. I think she didn't. 659 00:33:26,080 --> 00:33:30,400 Speaker 1: Ping has certainly made his interest in taking on that 660 00:33:30,520 --> 00:33:33,440 Speaker 1: role clear, But when you actually look at what China 661 00:33:33,640 --> 00:33:37,000 Speaker 1: is doing, it becomes clear that first of all, China 662 00:33:37,200 --> 00:33:41,200 Speaker 1: is not a leader or a defender of globalization as 663 00:33:41,240 --> 00:33:44,480 Speaker 1: a she didn't being asserted last year in Davos, but 664 00:33:44,560 --> 00:33:46,800 Speaker 1: also really has not stepped up to the plate to 665 00:33:46,920 --> 00:33:51,120 Speaker 1: lead on any number of global issues, from the refugee 666 00:33:51,120 --> 00:33:54,880 Speaker 1: crisis to climate change, um to you know, sort of 667 00:33:54,920 --> 00:33:58,480 Speaker 1: the openness of its markets. Um so. I think it 668 00:33:58,640 --> 00:34:02,680 Speaker 1: bears us looking hard at the facts on the ground 669 00:34:02,720 --> 00:34:07,080 Speaker 1: to understand the reality of China's actions as opposed to 670 00:34:07,680 --> 00:34:10,040 Speaker 1: the rhetoric of Sijin Ping and a lot of media 671 00:34:10,120 --> 00:34:14,680 Speaker 1: hype frankly that has surrounded Sijin Pings leadership of China. 672 00:34:14,960 --> 00:34:19,560 Speaker 1: Your forthcoming books entitled The Third Revolution, Jing Ping and 673 00:34:19,680 --> 00:34:23,160 Speaker 1: the New Chinese State, can you tell us about this 674 00:34:23,280 --> 00:34:26,680 Speaker 1: new Chinese State? And from an investor perspective, what should 675 00:34:26,719 --> 00:34:30,120 Speaker 1: we take away about what you describe as the contradictory 676 00:34:30,280 --> 00:34:34,960 Speaker 1: nature of reform under the Chinese president. Certainly so, I 677 00:34:34,960 --> 00:34:37,680 Speaker 1: mean over the past thirty years, um, you know, there's 678 00:34:37,719 --> 00:34:42,480 Speaker 1: been an understanding I think broadly both within China and 679 00:34:42,520 --> 00:34:46,080 Speaker 1: certainly in the international community that has China's developing, Its 680 00:34:46,120 --> 00:34:49,000 Speaker 1: markets are going to continue to open, Its political system 681 00:34:49,080 --> 00:34:52,560 Speaker 1: is going to continue to liberalize and to reform. But 682 00:34:52,600 --> 00:34:56,000 Speaker 1: if we look at the past five years under Sijin 683 00:34:56,040 --> 00:35:00,000 Speaker 1: Pings leadership, he's really turned those kinds of assumptions uh 684 00:35:00,080 --> 00:35:03,120 Speaker 1: on their collective heads. And so what we've seen in 685 00:35:03,280 --> 00:35:06,600 Speaker 1: China under she's really uh, you know, a return to 686 00:35:06,640 --> 00:35:10,440 Speaker 1: the strongman leadership, a centralization of authority under Shi Jin 687 00:35:10,520 --> 00:35:14,480 Speaker 1: Ping's personal uh leadership, so you no longer have the 688 00:35:14,560 --> 00:35:17,440 Speaker 1: kind of collective leadership that you have. You've seen an 689 00:35:17,520 --> 00:35:21,719 Speaker 1: increasing penetration of the Communist Party into society and into 690 00:35:21,800 --> 00:35:25,840 Speaker 1: the economy for example, uh, you know, the party committees 691 00:35:25,880 --> 00:35:29,640 Speaker 1: wanting to make investment decisions for state don't enterprises or 692 00:35:29,680 --> 00:35:32,920 Speaker 1: for even joint ventures that are done with multinationals. I 693 00:35:33,000 --> 00:35:36,000 Speaker 1: think most recently we saw that the Communist Party has 694 00:35:36,040 --> 00:35:38,800 Speaker 1: said they're going to take a stake in China's largest 695 00:35:38,840 --> 00:35:42,279 Speaker 1: technology companies like Ali Baba, Intense cent Um. You know, 696 00:35:42,360 --> 00:35:45,520 Speaker 1: this is not the direction in which we thought the 697 00:35:45,680 --> 00:35:49,000 Speaker 1: Chinese government was going to uh to move. So we've 698 00:35:49,000 --> 00:35:52,160 Speaker 1: seen a strengthening of the state don't enterprises under Shi 699 00:35:52,280 --> 00:35:54,560 Speaker 1: jin Ping, and a lot of people thought that it 700 00:35:54,560 --> 00:35:56,520 Speaker 1: wasn't going to move this way, right if they look 701 00:35:56,560 --> 00:35:59,120 Speaker 1: back to two thousand and thirteen and the Third Plan 702 00:35:59,239 --> 00:36:01,879 Speaker 1: with the eighteenth Party Congress, when a lot of people 703 00:36:01,960 --> 00:36:04,600 Speaker 1: here in the United States said, wow, look at this document. 704 00:36:04,640 --> 00:36:07,800 Speaker 1: It talks a lot about the market being a decisive force. 705 00:36:08,320 --> 00:36:10,440 Speaker 1: That was true, but what they missed was that the 706 00:36:10,520 --> 00:36:13,200 Speaker 1: state was going to remain in command of the economy. 707 00:36:13,560 --> 00:36:18,200 Speaker 1: And certainly we've seen Si Jinping, you know, dramatically restrict 708 00:36:18,480 --> 00:36:22,480 Speaker 1: the outward flow of capital over the past year, right, 709 00:36:22,520 --> 00:36:25,640 Speaker 1: putting a reigning in a lot of overseas investments. So 710 00:36:25,840 --> 00:36:28,440 Speaker 1: a lot of changes that move in the other direction, 711 00:36:28,680 --> 00:36:31,440 Speaker 1: you know, as opposed to liberalization. Well, but but when 712 00:36:31,440 --> 00:36:34,200 Speaker 1: it when it comes to just investors and and the 713 00:36:34,280 --> 00:36:37,560 Speaker 1: Chinese markets, I mean, we just saw that GDP reading 714 00:36:37,680 --> 00:36:39,960 Speaker 1: for and you know, a lot of people might say 715 00:36:39,960 --> 00:36:43,000 Speaker 1: that those numbers are totally fudged, very difficult to really 716 00:36:43,000 --> 00:36:45,560 Speaker 1: glean any any truth from, but they showed the first 717 00:36:45,600 --> 00:36:50,520 Speaker 1: acceleration and the most meaningful acceleration since in the Chinese 718 00:36:51,440 --> 00:36:54,600 Speaker 1: economic growth outlook. I mean, is this a bad thing, 719 00:36:54,719 --> 00:36:58,360 Speaker 1: especially as the economy does open up at least two banks. 720 00:36:58,400 --> 00:37:02,320 Speaker 1: I mean having having a larger presence there for in 721 00:37:02,400 --> 00:37:04,880 Speaker 1: banks having a larger presence in China, I mean as 722 00:37:04,920 --> 00:37:08,799 Speaker 1: an investor, isn't it you know they're still managing it well. 723 00:37:08,840 --> 00:37:11,439 Speaker 1: I would say this first of all, Um, I think 724 00:37:11,480 --> 00:37:14,520 Speaker 1: it's it's right to be cautious about Chinese numbers. And 725 00:37:14,520 --> 00:37:17,239 Speaker 1: everybody knows this, and everybody says this, Um, But you 726 00:37:17,320 --> 00:37:19,759 Speaker 1: just have to look at the most recent statements from 727 00:37:19,840 --> 00:37:23,000 Speaker 1: you know, Tien's in one of China's most productive, largest 728 00:37:23,000 --> 00:37:26,520 Speaker 1: economic regions, where they said that they inflated their growth 729 00:37:26,880 --> 00:37:30,160 Speaker 1: in seen by a third, or what just came out 730 00:37:30,200 --> 00:37:34,680 Speaker 1: from Inner Mongolia, you know, a heavy industrial center for China, 731 00:37:35,080 --> 00:37:39,200 Speaker 1: where they said that their estimates fort over what they 732 00:37:39,239 --> 00:37:43,280 Speaker 1: actually were. Just to say, let's let's not get overly 733 00:37:43,320 --> 00:37:46,200 Speaker 1: excited over the six point nine percent that we've seen 734 00:37:46,239 --> 00:37:49,000 Speaker 1: this year, because we don't really know the reality. We 735 00:37:49,040 --> 00:37:52,560 Speaker 1: won't really know the reality for at least another year. Um. 736 00:37:52,600 --> 00:37:55,200 Speaker 1: Having said that, you know, China continues to grow, and 737 00:37:55,280 --> 00:37:58,319 Speaker 1: it's part of Jin Pink's pledge that he's going to 738 00:37:58,440 --> 00:38:01,279 Speaker 1: double per capita g d P between two thousand ten 739 00:38:01,320 --> 00:38:04,160 Speaker 1: and two thousand and twenty, and that requires that between 740 00:38:04,200 --> 00:38:06,880 Speaker 1: two thousand and sixteen and two thousand twenty that g 741 00:38:07,040 --> 00:38:09,400 Speaker 1: d P grow on an average of six and a 742 00:38:09,480 --> 00:38:13,280 Speaker 1: half percent. So whatever is actually happening the Chinese economy, 743 00:38:13,719 --> 00:38:16,120 Speaker 1: you're going to see numbers that are gonna make sure 744 00:38:16,200 --> 00:38:19,680 Speaker 1: that that GDP per cabin is doubled by And as 745 00:38:19,680 --> 00:38:23,319 Speaker 1: far as what it means for investors in China, I 746 00:38:23,360 --> 00:38:26,680 Speaker 1: would only point to both European Chamber of Commerce and 747 00:38:26,719 --> 00:38:29,720 Speaker 1: American Chamber of Commerce reports over the past several years 748 00:38:30,120 --> 00:38:33,600 Speaker 1: that talk about the increasing difficulty of doing business in 749 00:38:33,680 --> 00:38:37,160 Speaker 1: China these days. Uh. And while you're right that there 750 00:38:37,239 --> 00:38:40,360 Speaker 1: was a recent opening for banks that came about after 751 00:38:40,480 --> 00:38:46,200 Speaker 1: the Trump she meeting, um, in fact, what I've understood 752 00:38:46,840 --> 00:38:49,520 Speaker 1: is that this is a little bit too little, too late, right, 753 00:38:49,840 --> 00:38:52,719 Speaker 1: that there's not that much room at this point for 754 00:38:52,719 --> 00:38:54,880 Speaker 1: foreign banks to to take on a you know, a 755 00:38:54,920 --> 00:38:57,800 Speaker 1: bigger share of the Chinese market because the Chinese have 756 00:38:57,880 --> 00:39:00,400 Speaker 1: protected it for so long that you know, Chinese banks 757 00:39:00,440 --> 00:39:04,960 Speaker 1: now basically command the banking system. So, you know, I 758 00:39:04,960 --> 00:39:08,000 Speaker 1: think that's a challenge that many American companies are going 759 00:39:08,040 --> 00:39:09,879 Speaker 1: to face at the United States is going to face 760 00:39:10,239 --> 00:39:12,680 Speaker 1: as it continues to press China to open up more 761 00:39:12,760 --> 00:39:15,360 Speaker 1: sectors of its economy that in fact, China is going 762 00:39:15,400 --> 00:39:19,000 Speaker 1: to wait until it really commands those sectors and then say, sure, 763 00:39:19,360 --> 00:39:20,960 Speaker 1: we welcome you in. Of course you're not going to 764 00:39:21,040 --> 00:39:23,360 Speaker 1: be able to compete, but have at it. Thank you 765 00:39:23,440 --> 00:39:26,080 Speaker 1: very much for being with us. Elizabeth Economy, CV STAR, 766 00:39:26,239 --> 00:39:29,120 Speaker 1: Senior Fellow and Director for Asia Studies at the Council 767 00:39:29,160 --> 00:39:32,160 Speaker 1: of Foreign Relations. She can be followed on Twitter at 768 00:39:32,400 --> 00:39:37,560 Speaker 1: Liz Economy. Thanks for listening to the Bloomberg P and 769 00:39:37,680 --> 00:39:40,719 Speaker 1: L podcast. You can subscribe and listen to interviews at 770 00:39:40,760 --> 00:39:45,200 Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm 771 00:39:45,239 --> 00:39:48,680 Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on 772 00:39:48,719 --> 00:39:52,000 Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You 773 00:39:52,000 --> 00:40:01,600 Speaker 1: can always catch us worldwide on Bloomberg Radio.