Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg P M L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well,
Speaker 1: the SEC has been having some issues with the idea
Speaker 1: of a bitcoin e t F, and here to talk
Speaker 1: about that is our our own Eric Valtunist. He has
Speaker 1: a senior E t F strategist for us at Bloomberg Intelligence.
Speaker 1: Eric tell us about the latest. What did the SEC
Speaker 1: recently say? They put out a letter last night and
Speaker 1: they had thirty one questions opening to questions about yeah,
Speaker 1: that's it right, um in five sections. It reminds me
Speaker 1: the end of back to school when they're like, we
Speaker 1: have one question, but it's twenty seven parts and he
Speaker 1: spends all day answering it. Um. Look, a lot of
Speaker 1: these questions are answered in the prospectus is it's they're
Speaker 1: asking something like how will then not have be calculated? Well,
Speaker 1: the perspective does address that. I think, really, what's going
Speaker 1: on here. If you want to just kind of like
Speaker 1: be honest about it, the SEC will be honest. I'm
Speaker 1: just gonna be real right now, go ahead, the SEC.
Speaker 1: This is a hot issue. They realize there's investor demand
Speaker 1: for this big time, right, so they won't be sensitive
Speaker 1: to that. At the same time, they're just not comfortable,
Speaker 1: so they want to show everybody that they have been
Speaker 1: very thoughtful about this. They're taking this very seriously. Here's
Speaker 1: what they're concerned with. They want to throw it all
Speaker 1: on the table, and I think that. But the thing
Speaker 1: is a lot of these are already addressed in the prospectus.
Speaker 1: Some of them get really deep, like how are you
Speaker 1: going to protect against the hack? Now, that is a
Speaker 1: question you will never ever probably be able to answer
Speaker 1: with security. So there's always going to be some unanswerability
Speaker 1: to some of these questions. So are you basically saying
Speaker 1: the SEC is basically doing a c y A exercise
Speaker 1: with this list of questions, saying to the public, look, guys,
Speaker 1: we're concerned. We've got general concerned, and so we're not
Speaker 1: going to prove these things yet. Thinking about it, we
Speaker 1: don't know exactly why. We understand everyone wants to buy
Speaker 1: these things. We get it. We're we're sensitive to that.
Speaker 1: But um, I was barrish last night after I read it.
Speaker 1: But I talked to a few issuers, and I don't
Speaker 1: on the prospect on the prospect of a bit quin
Speaker 1: et F launching, say in the next year or two,
Speaker 1: but I don't know. I think issuers are in there,
Speaker 1: They're gonna work with them. I've heard people are like,
Speaker 1: we are definitely going to address these because I was thinking,
Speaker 1: man if I was an insuer and they just came
Speaker 1: out with with all this, I might just be like, oh,
Speaker 1: you know, what, the heck with it, I'll just try
Speaker 1: to launch so much money at stake here. I know
Speaker 1: the first one out gets easily it's a billion dollar product.
Speaker 1: I mean easily could be a billion dollar product in
Speaker 1: a couple of days. So that is what makes this
Speaker 1: all so exciting, although exhausting for me, because there's this
Speaker 1: is a race, and I'm telling you every other week
Speaker 1: there's some major turn in this race. And then this
Speaker 1: week we had the blockchain ETFs launch, which a lot
Speaker 1: more easier to launch. Right these are tracking equities that
Speaker 1: are involved the blockchain technology. But even there, the sec
Speaker 1: got a little nerve nervousness and made them take blockchain
Speaker 1: out of their name and use something more generic, UM
Speaker 1: like transformational data sharing. So there's a lot of concern
Speaker 1: at the SEC that they are going to be looked
Speaker 1: at as being a little too liberal. Um not not
Speaker 1: not a catchy enough name for you. I'm gonna say that,
Speaker 1: roll off the tongue transformational. Listen him. I got good
Speaker 1: news for you. The tickers block well that that that
Speaker 1: helps small brain here. This is but this is yesterday.
Speaker 1: We had reality shares that are the earlier this week
Speaker 1: on on our show, and he said, he corrected me,
Speaker 1: is that actually that's no longer our name, and that
Speaker 1: was the reason why it is the SEC. There's his
Speaker 1: next gen economy. But would you think of it? I
Speaker 1: don't know anyway, I call him the blockchain ets. The
Speaker 1: tickers speak to that. So they're doing well. They're all
Speaker 1: already both trading a lot, and they're off to good starts,
Speaker 1: especially for indie issuers. I'm gotta ask about this idea
Speaker 1: of turning everything into an exchange traded fund. The one
Speaker 1: of the arguments war exchange traded funds is you get
Speaker 1: daily liquidity. You can trade it like a stock. Oh
Speaker 1: and by the way, it's not going to hit you
Speaker 1: with those tax those onerous tax bills like a mutual fund,
Speaker 1: even if you don't sell the fund. I'm sorry, how
Speaker 1: does that connect with these kinds of offerings? Right? I
Speaker 1: would go back to the originally t F s P Y.
Speaker 1: It really was put out there to be a physically
Speaker 1: backed version of a futures contract. So there is a
Speaker 1: trading element to e t F and there always has been.
Speaker 1: And I would argue, h y G, that's a leasa's
Speaker 1: favorite et F. The HI J and K might be
Speaker 1: your favorite, but it's a it's a it's a who knows.
Speaker 1: I don't even need to talk. People can still in
Speaker 1: the place ahead Eric, What else do I like? But
Speaker 1: these are predominantly these kind of things, Bitcoin, marijuana, junk bonds,
Speaker 1: These are predominantly used by traders looking to get quick
Speaker 1: positions on those. You know, the retail investors are When
Speaker 1: you say quick positions, are you trying to say you
Speaker 1: have traders who are trying to make quick money taking
Speaker 1: advantage of people. No, no, just quick access, but just
Speaker 1: thin get one out. But it's got to be a
Speaker 1: buyer and a seller. Well, someone's gonna lose money. If
Speaker 1: someone's gonna make money, who's gonna be the loser. That's
Speaker 1: the way the bond and stock market work anyway. I
Speaker 1: mean there's traders and people trading those all the time
Speaker 1: to actually things behind them. Well, and this is the key.
Speaker 1: Hold on a second, Well they do they do? You
Speaker 1: know any t F? Again, I always tell people that
Speaker 1: it is uh, it is a mutual fund. It holds
Speaker 1: the stocks in it with a custodian and the or
Speaker 1: the bonds. All right, so you know here's the thing.
Speaker 1: I think this is the issue is you know, with
Speaker 1: with jump bonds, with stocks, there is something that is
Speaker 1: a security that is backing these e t f s.
Speaker 1: With bitcoin, I mean Morgan Stanley and Goldman Sacks have
Speaker 1: laid out issues with how do you act as a
Speaker 1: custodian of bitcoin? I mean what is bitcoin? How do
Speaker 1: you store? Who's going to make sure that you know
Speaker 1: that hackers aren't going to get in? I mean we've
Speaker 1: we recently had a story about how hacking bitcoin is
Speaker 1: a massive industry. I mean, these are some major issues
Speaker 1: are and when you approve an e t F, you're
Speaker 1: basically saying it's ready for prime time. So that's what
Speaker 1: the SEC. This is. You know, Middle America can then
Speaker 1: go to their brokerage account and buy this thing. That's
Speaker 1: what the SEC is concerned with. However, there's a product
Speaker 1: on the market GBTC, which is an over the counter
Speaker 1: traded trust trades it huge premiums and I've heard some
Speaker 1: discount brokerages classifying as an e t F. So I
Speaker 1: would somewhat you use the alternative argument, which there's other
Speaker 1: products out there that are more dangerous. At least with
Speaker 1: an e t F, you'd bring in the nation's richest
Speaker 1: market makers doing the tightest arbitrage. You'd bring in a
Speaker 1: lot of liquidity, and you'd get as close to the
Speaker 1: best possible deal. It's the best structure for something that
Speaker 1: is as archaic or or not archaic, but as uh
Speaker 1: new as bitcoin. I've seen it done with China A
Speaker 1: shares they had Chinas before the government even allowed as shares.
Speaker 1: They had to use quota from people in Hong Kong.
Speaker 1: A t f s have this sort of history of
Speaker 1: like nudging their way into an area, maybe even before
Speaker 1: it's ready, and then you figure out later, oh it
Speaker 1: is fine. But I would say bitcoin is a special case,
Speaker 1: it's not fine. Yeah, And look at the end of
Speaker 1: the day, though these are investment vehicles, investments do they
Speaker 1: go down. But the question on bitcoin, though, is unlike
Speaker 1: g l D, where I guess you're you're your feel
Speaker 1: secure that the gold bars are in a vault with
Speaker 1: guys with machine guns guarding it. Here you're like, yes,
Speaker 1: someone could hack it. What would happen? Um, Although I
Speaker 1: will say there are e t N s in the world.
Speaker 1: E t N s have credit risk. Lehman had an
Speaker 1: e t N People do not get their money back,
Speaker 1: so there are products. That's why I think bitcoin, if
Speaker 1: I were out there, I would do it an e
Speaker 1: t N wrapper because people already go in knowing there's
Speaker 1: credit risk. So I think E t N might be
Speaker 1: a better vehicle for bitcoin. But no one's launched one
Speaker 1: for whatever reason. We're filed for one. Why why do
Speaker 1: you believe that to be so? I think right now
Speaker 1: big banks are less willing to have anything on their
Speaker 1: balance sheet because of regulations, so they've scaled back on
Speaker 1: their E t N s. But if one of them
Speaker 1: would just step up and say, you know, this is
Speaker 1: actually a great opportunity for us. We're Okay, having this, uh,
Speaker 1: I think it could be a really big hit product.
Speaker 1: And if that gets liquidity and an e t F
Speaker 1: launches after, no one will care. They'll still use the
Speaker 1: e t N mostly. Okay, not to change the subject
Speaker 1: too much, but you sit there reading the t leaves
Speaker 1: of E t F world, and I just want to
Speaker 1: get your sense what should we be paying attention to.
Speaker 1: Are there any shifts in flows that are really notable
Speaker 1: that you think are representative of shifts in a market sentiment? Yeah?
Speaker 1: Two things I'll give you real quick is one, I
Speaker 1: find people are hot about industrials and aerospace and defense. Yeah,
Speaker 1: this is the Trump trade. But I will say those
Speaker 1: those e t F s kicked back in after tax reform,
Speaker 1: so I felt there was a little kick to the
Speaker 1: Trump trade after tax reform. People thought it might have
Speaker 1: might not have the legs it does, but it does
Speaker 1: apparently so X L I, I T A have seen
Speaker 1: a lot of inflows in the past couple of weeks.
Speaker 1: And another one you're again back to your favorite topic,
Speaker 1: is high YOU'LD debt. We've seen this interesting shift into
Speaker 1: interest rate hedge gtfs. They haven't taken a lot, but
Speaker 1: it's like a swell out. There could be a big
Speaker 1: wave soon, and that is h y g H. These
Speaker 1: are e t f s that basically take like the
Speaker 1: high you'ld debt or investment grade debt and then they
Speaker 1: short treasury futures in order to have no rate risk.
Speaker 1: What you're going to find is they're starting to out
Speaker 1: perform h y G. So h y g H has
Speaker 1: outperformed h y G by a good degree since rates
Speaker 1: have quietly started rising over the last four months, and
Speaker 1: we've seen flows into this. This thing is a basically
Speaker 1: doubled size in the past couple of weeks. Watch for
Speaker 1: people rotating out of h y G into h y
Speaker 1: g H, out of l q D into l q
Speaker 1: d H. It reminds me of currency hedge dtfs a
Speaker 1: couple of years ago, where it says I want this,
Speaker 1: but I don't want this. It's sort of a package trade.
Speaker 1: That's what these rate hedge dtf do. And I think
Speaker 1: they could have some uh, they could see some flows. Eric.
Speaker 1: When you talk about that perhaps transition from let's say
Speaker 1: h y G to h y g H in order
Speaker 1: to take advantage of that hedging capability, does that sale
Speaker 1: of h y g doesn't that affect the value of
Speaker 1: the underlying asset. Right, So if people sell h y
Speaker 1: G and there's a lot of selling pressure, yes, uh,
Speaker 1: somebody will take the h y G and do a redemption.
Speaker 1: That would put selling pressure on the bond. So the
Speaker 1: e t F would Uh, if people were selling h
Speaker 1: y G, it would put selling pressure on the bonds ultimately.
Speaker 1: But again that's probably gonna happen in concert with people
Speaker 1: selling bonds. That It's not like somebody Yeah, but if
Speaker 1: you're in a rapper that says, oh no, don't worry
Speaker 1: about it because we're gonna hedge out the risk for you. Uh,
Speaker 1: that might give you that false sense of security. Well again,
Speaker 1: it still does whole own high yield debt, right, and
Speaker 1: then it also is gonna short trauge. In other words,
Speaker 1: it's not just saying we're gonna do this and then
Speaker 1: we're gonna do whatever with the money. It actually does
Speaker 1: it with the money. I'd almost equate this to the way,
Speaker 1: you know, if an institution has a prime broker and
Speaker 1: you want to put that trade on, that's what they do.
Speaker 1: E t F have democratized everything, and like you said,
Speaker 1: does everything need to be democratized? That's a big debate.
Speaker 1: But package trades getting a currency hedge exposure or high
Speaker 1: yield debt exposure, that is ultimately what's happening here. We
Speaker 1: gotta leave it there. I want to thank you very
Speaker 1: much Eric Valcunus, he is our senior E T F
Speaker 1: analyst for Bloomberg Intelligence. Well, the world of fashion has
Speaker 1: changed dramatically, mainly in the way that it is being
Speaker 1: marketed and distributed. Here to talk about that is Rebecca
Speaker 1: and Ory Minkoff. They are co founders of the Rebecca
Speaker 1: Minkoff and Ury Minkoff brands, and they joined us here
Speaker 1: in our Bloomberg eleven three oh studios. Thank you both
Speaker 1: for for being with us. Rebecca, I want to start
Speaker 1: with you, and I want to ask you specifically about
Speaker 1: how you have changed your use of social media over
Speaker 1: the past few years to more directly target your customers
Speaker 1: and frankly bypass big advertisers. I think what's really key,
Speaker 1: and it's something you know started before social media is
Speaker 1: it's always been about my conversation with the consumers. So
Speaker 1: social media has allowed us to continue to have a
Speaker 1: dialogue with her directly. We didn't have to have any
Speaker 1: middleman and so social media is that tool that we use,
Speaker 1: whether it's Instagram or Twitter or Facebook to really just
Speaker 1: talk to her. And uh, you don't to advertise her
Speaker 1: because she's not looking for that anyway. She just wants
Speaker 1: an authentic connection and if I can be that for her,
Speaker 1: then then she's happy and so am I. But have
Speaker 1: you actually cut back on more traditional means of advertising
Speaker 1: as you more directly connect with her. We've actually never
Speaker 1: had to do the traditional advertising route because we had
Speaker 1: that connection early on, so we didn't have to invest,
Speaker 1: you know, hundreds of thousands of ad dollars in glossy magazines.
Speaker 1: I think it was about I know you, you know me,
Speaker 1: and we're going to talk and it's going to be
Speaker 1: authentic and that's more real. Or I want to bring
Speaker 1: you in and just to talk about the actual business
Speaker 1: of fashion. Because in reading a recent issue of Women's
Speaker 1: Where Daily, Uh, there was an issue with one of
Speaker 1: your distribution and supply chain partners, and I thought it
Speaker 1: was interesting the way you handled it was to go
Speaker 1: directly to Facebook and use that as a medium to
Speaker 1: communicate obviously not only with your other business partners, but
Speaker 1: really with your customer base. Yeah, you know in this
Speaker 1: day and age, community is so portant and our customer
Speaker 1: bases is so important to us. UM. We moved to
Speaker 1: a new warehouse, third party logistics warehouse right before the
Speaker 1: holiday season. We also moved to a new web platform
Speaker 1: really to optimize around long term growth UH. And the
Speaker 1: demand for our product was so great that they just
Speaker 1: couldn't keep up with it during the holiday season, and
Speaker 1: so we had some some shipping delays because the expectations
Speaker 1: just we're not there with it was just far outceded
Speaker 1: expectations UM. And it's not a bad problem to have,
Speaker 1: not a bad problem to have, but you know, our
Speaker 1: community is so close to Rebecca and they're so embracive
Speaker 1: of her in the brand UM, and some of them
Speaker 1: felt disappointed. So it's important for Rebecca to God and
Speaker 1: make a statement to them directly and to really sit
Speaker 1: there and answer their questions. And it's something that will
Speaker 1: be continuing to refine. Rebecca. I also ask you about
Speaker 1: the Women's March. I know you have an initiative where
Speaker 1: you are outfitting some of the leaders in the Women's
Speaker 1: March Committee and then in photographs you can click on
Speaker 1: the different things that they're wearing, and it shows you
Speaker 1: how much they are and how you can buy them.
Speaker 1: And I'm just wondering about if this is the first
Speaker 1: sort of cause that you've associated yourself with, how you
Speaker 1: choose causes, and how you do that while not alienating
Speaker 1: any of your customers who might not agree with your cause.
Speaker 1: This is definitely not the first time I've been working
Speaker 1: with a cause. I think, you know, when we had
Speaker 1: our first Sea By Wear in the streets on Green Street,
Speaker 1: there was a lot of social unrest at the time,
Speaker 1: a lot of bombings had just occurred, and I said,
Speaker 1: I can't just have a fashion show, you know, So
Speaker 1: we worked with Not on our Watch. We had as
Speaker 1: incredible graffiti artist do some art on on the back
Speaker 1: of these jackets, and the proceeds went to Not on
Speaker 1: Our Watch. And then last February in our fashion show,
Speaker 1: we worked with UM Girl Rising, so empowering girls in
Speaker 1: different communities. Again worked with an artist and the proceeds
Speaker 1: went to these organizations and UM. My relationship with the
Speaker 1: Women's March actually started last year when they reached out,
Speaker 1: they said, we want a uniform. Is there any way
Speaker 1: you know, it's like two days before the march. Do
Speaker 1: you have any shoes or bags that could make us
Speaker 1: all look the same. And I said, hell, yes, um,
Speaker 1: you're like, absolutely, I do my wardrobes done someone to
Speaker 1: the warehouse, Um, and you know, I was really proud
Speaker 1: that I was able to support them with something small
Speaker 1: that you know, made them feel really empowered that day.
Speaker 1: So you know, this year in Louis of a fashion show,
Speaker 1: because I am due during fashion week with my third child,
Speaker 1: I said, how can I really do something that's impactful again?
Speaker 1: And I reached out to the organizers said I would
Speaker 1: love to profile tell your stories and for me, it's
Speaker 1: about female equality and empowerment and if someone has an
Speaker 1: issue with that, then I don't frankly want them to
Speaker 1: be my customer. Well, I guess with the issue being
Speaker 1: that sometimes you know, it's increasingly taken a more political totally,
Speaker 1: so perhaps the insinuation there is what people would object to,
Speaker 1: not necessarily women's empowerment totally. And um. We also made
Speaker 1: a significant donation to support their book launch and the
Speaker 1: Women's March. In general, speak if you can about the
Speaker 1: influencers that exist on line in the world of social media,
Speaker 1: because that is also changing the whole way in which
Speaker 1: buyers interact with you as the creative element, because not
Speaker 1: necessarily to go to a runway show, for example, if
Speaker 1: you have the right influencers or people that are able
Speaker 1: to put up the photographs or their comments on Instagram
Speaker 1: or Facebook, have you found that that is better in
Speaker 1: many ways? You know, Ori and I started working with influencers.
Speaker 1: In the very beginning, we had interventions, people telling us
Speaker 1: you're working with Cless celebrities, You're going to ruin your
Speaker 1: brand with these people, and we really decided to be
Speaker 1: fearless and not listen to them. And I think it
Speaker 1: was about, again, how do you get these people that
Speaker 1: have great communities, great people that follow them and and
Speaker 1: have it again a genuine connection. So I think we
Speaker 1: talked about the influencers that you know, convert to sales,
Speaker 1: the some that also just get you brand recognition, but
Speaker 1: it still has to be authentic at the end of
Speaker 1: the day. It's so powerful today the relationship between you know,
Speaker 1: the influencers and their consumers and their followers and our
Speaker 1: relationship with them, um and that's how you build community
Speaker 1: in this new digital day and age. And those influencers
Speaker 1: don't necessarily have to beat celebrities in a more traditional
Speaker 1: sense of the word even better if they're not really Yeah,
Speaker 1: I think, I think, you know, there's there's this authenticity,
Speaker 1: there's this you know, growing up, you always had you know,
Speaker 1: the person next door that looked great, right, Well, not
Speaker 1: that person next door has millions of people following them,
Speaker 1: and they're known for their style and their discovery and
Speaker 1: how they go through their life. And people are reacting
Speaker 1: against the glossy everything is perfect. They want to know,
Speaker 1: you know, what that person's life is like and their
Speaker 1: ups and their downs, and these people are are sharing them.
Speaker 1: So it's this live reality TV version of of really
Speaker 1: cool people online. And these communities leverage in the millions
Speaker 1: and so and even now we're seeing a trend even
Speaker 1: away from macro influencers towards micro influencers, where you have
Speaker 1: people that have followings of five or ten thousand, and
Speaker 1: their communities are so engaged that they'll literally follow them
Speaker 1: to the ends of the earth. So we run campaigns
Speaker 1: and work with influences, you know, macro micro all the time,
Speaker 1: and and and when we find an influencer that has
Speaker 1: an authentic connection to the brand, an authentic community, we
Speaker 1: all just grow together. I love this idea of many
Speaker 1: cults kind of propping up on different social media platforms.
Speaker 1: And we noticed that one of your bags has a
Speaker 1: sponsored icon next to it on Amazon, and it raises
Speaker 1: this question of how you use Amazon? Does that mean
Speaker 1: that you can pay them for better placement? Um? How
Speaker 1: has it kind of changed the way you go about things?
Speaker 1: So we do not sell directly to Amazon our bags.
Speaker 1: Um we did in the past. Uh. And we we
Speaker 1: decided to not work with them directly. Uh simply because, um,
Speaker 1: you know, there's a lot of discounting and so forth,
Speaker 1: and it was important to us to keep the integrity
Speaker 1: of respecting the full price window is the full price window. Um,
Speaker 1: So we opted out of that direct relationship Amazon does.
Speaker 1: Just to be real clear there. So in other words,
Speaker 1: you were saying that they wanted you to discount your
Speaker 1: bag in order to give them part of the profit,
Speaker 1: or because they thought that it would be in the
Speaker 1: past successful. In the past, we had a wholesale retail
Speaker 1: relationship with them. But obviously they could they could set
Speaker 1: their pricing. It's it's illegal in the US to dictate pricing. Um.
Speaker 1: And but we found that but you could choose not
Speaker 1: to sell to somebody um and we found that we
Speaker 1: couldn't get them to respect our pricing windows um and
Speaker 1: and and with that regard, we chose to not continue
Speaker 1: a business relationship with them for our bags. That being said,
Speaker 1: they have a large marketplace, so any third party person
Speaker 1: can set up a store and go sell on that marketplace,
Speaker 1: whether they're an individual, they could do fulfilled by Amazon
Speaker 1: and it can be marketed to Prime members. So for
Speaker 1: the end consumer, it gets very confusing of whether there's
Speaker 1: an authentic relationship with the brand or whether someone bought
Speaker 1: a bag somewhere and it's frankly reselling it. So whatever
Speaker 1: you're buying there of current goods is mostly through you know,
Speaker 1: a reseller doing it rather than us having a direct
Speaker 1: connection with Amazon. Today, Rebecca, you are ahead of the
Speaker 1: curve in so many ways, and it seems as though
Speaker 1: you're at least three years early when it comes to
Speaker 1: virtual reality. You know, virtual reality is sort of the
Speaker 1: big buzzword right now, or artificial intelligence and enhanced reality
Speaker 1: and so on. But going back to September off you
Speaker 1: were offering virtual reality headsets so that people could actually
Speaker 1: see some of your shows using their I phone. I
Speaker 1: think it's important, um word I like to take risks
Speaker 1: in this space, and because of his technology background, he
Speaker 1: likes to take even larger risks and feels confident doing so.
Speaker 1: And I think any risk that he proposed, by any
Speaker 1: chance that you have shot down. Yeah, there were a
Speaker 1: couple and I hadn't want to do that backfired. What
Speaker 1: you learned from details? You know, I think I think
Speaker 1: it's important to understand who your partner are. Obviously we're
Speaker 1: not a technology company, so it's it's really vetting the
Speaker 1: partners and can they deliver on time and can they
Speaker 1: support you? And what we found is that there are
Speaker 1: some amazing startups um and you get this one on
Speaker 1: one attention, or sometimes there's very large corporations and they
Speaker 1: have internal support. So we figured out what works. Um.
Speaker 1: I think, you know, one to tell people what it
Speaker 1: gives people a hint so they don't have to go
Speaker 1: through the same pain in agony. Hint in terms of
Speaker 1: what to avoid, what to avoid, you know, I think
Speaker 1: one time, always listen to your sister. Sometimes listen to
Speaker 1: your sister as someone with an older brother. UM No,
Speaker 1: I think I think one time we we decided to
Speaker 1: encourage um. You know, a live feed of sorts during
Speaker 1: a live presentation, and and and sometimes when you do that,
Speaker 1: you get you get some people that have um ulterior
Speaker 1: purposes or motives and threw up some inappropriate content during
Speaker 1: a live experience. So my sister suggested, Hey, maybe we
Speaker 1: shouldn't do this, and I was like, no, I got
Speaker 1: this and I didn't have it um. But fortunately everything
Speaker 1: else has has worked out. I think with the virtual reality,
Speaker 1: as you said though, it's fascinating because I think, whether
Speaker 1: it's three or five years from now, you'll be sitting
Speaker 1: in your apartment or you'll be sitting in a city
Speaker 1: that doesn't have, you know, a Bergdorf Goodman or a
Speaker 1: Becka Minkoff store, and you'll feel like you're live walking
Speaker 1: through there, um and and and we think that's an
Speaker 1: experience of the future, and we just wanted to start
Speaker 1: playing with it. So this is this raise is a
Speaker 1: really key question. Is brick and mortar dead? It's definitely
Speaker 1: not dead. I think it's just changing, and it's changing
Speaker 1: very quickly. I think if you're going to get someone
Speaker 1: to get out of their pajamas and get up off
Speaker 1: the couch, what are you going to give them in
Speaker 1: a brick and mortar store. You're making us sound so
Speaker 1: lazy if you're gonna get act, can we just talk
Speaker 1: in that context. Can we just talk money for for
Speaker 1: a second, because the cost of commercial real estate is
Speaker 1: no joke, and if you're running a retail operation, it
Speaker 1: is a major cost. Have you seen changes in the
Speaker 1: in the price that the landlords looking to charge you.
Speaker 1: We're seeing more favorable rates, um, much more favorable rates
Speaker 1: with landlords and they're willing to also test stuff out now.
Speaker 1: So I think for us, it's about we have fireside chats,
Speaker 1: we have community events, we have Forbes book Club, so
Speaker 1: we're constantly doing things to get people together off their
Speaker 1: phones in the store. And if you don't buy anything
Speaker 1: that night, it's totally fine. We just want you to
Speaker 1: connect and come away learning something. I think what we're
Speaker 1: seeing is that, you know, it isn't it isn't all.
Speaker 1: It's when we create community and we create events. Yes,
Speaker 1: there's the transaction in the store, but a lot of
Speaker 1: those people are then creating content and that content lives online,
Speaker 1: lives on mobile lives and apps, and then you're seeing
Speaker 1: a spike in online sales. Right. It's it's the phone,
Speaker 1: It's the fear of missing out. It's we had this
Speaker 1: amazing experience with Rebecca uh and a female leader, and
Speaker 1: all of a sudden, it's the people that weren't there
Speaker 1: that kind of want to be there, and we're seeing
Speaker 1: those sales start to spike as a result of these
Speaker 1: micro events that we do. So brick and mortar isn't dead,
Speaker 1: but that brick and mortar better be pretty darn cool
Speaker 1: to get people. And it might be less expensive, and
Speaker 1: it might be less expensive, it might be more temporary,
Speaker 1: it might be outfitted in different ways. Fascinating conversation. Thank
Speaker 1: you both so much for being with us, and congratulations
Speaker 1: on your soon to be addition, Rebecca. Rebecca Minkoff and
Speaker 1: Orri Minkoff, co founders of the Rebecca Minkoff and the
Speaker 1: or Minkoff Line, which is the Men's Line. Thank you
Speaker 1: so much for joining us here. You're listening to Bloomberg
Speaker 1: Markets with Pim Fox and Lisa Abramowitz on Bloomberg Radio.
Speaker 1: There was a legal question that emerged after Steve Bannon's
Speaker 1: testimony in front of Congress recently, where he invoked executive
Speaker 1: privilege for not talking about some of his experiences with
Speaker 1: President Trump. Here to talk about. That is Noah Feldman
Speaker 1: Felix Frankfurter, Professor of law at Harvard University. He's also
Speaker 1: a Bloomberg View columnist, and he comes to us from Boston. Noah,
Speaker 1: thank you so much for being with us. You know there,
Speaker 1: just if we want to back up here, there is
Speaker 1: a perception that some of the claims being used by
Speaker 1: the Trump administration are sort of on the fringes of law.
Speaker 1: And certainly Steve Bannon's claim of executive privilege, uh, covering
Speaker 1: the time before President Trump even became president that protected
Speaker 1: him and his conversations, uh, sort of goes over the
Speaker 1: line you ought to column about this. Can you explain
Speaker 1: why it may not? Sure? The basic idea of the
Speaker 1: executive privilege is that the president should be able to
Speaker 1: talk to his senior most advisers in a way that
Speaker 1: won't substantly be revealed to the world. And I think
Speaker 1: most of us agree that that's in general a good principle,
Speaker 1: and it has some basis in the Constitution insofar as
Speaker 1: the president has powers, including his foreign affairs powers, that
Speaker 1: he's supposed to exercise in his own terms. The question
Speaker 1: is when the president is not yet the president should
Speaker 1: he be able to take advantage of the privilege. And
Speaker 1: if you think of it's solely in terms of the
Speaker 1: fact that he is president when he exercises the privilege,
Speaker 1: and the answer is no, because there's only one president
Speaker 1: at the time, and during the transition of Barack Obama
Speaker 1: was president. But if you think of it in terms
Speaker 1: of the job that the president actually needs to do,
Speaker 1: that job begins after he's elected and before he's in auguent.
Speaker 1: He has to choose his most senior advisers, he has
Speaker 1: to talk about he gets briefed by officials from the
Speaker 1: pre existing administration. There's plenty there that we would not
Speaker 1: want the world to necessarily be able to hear. So
Speaker 1: if you see it purely in functional terms, there may
Speaker 1: be some reason to extend the privilege cautiously to the transition. No, uh,
Speaker 1: I wonder if you could describe what is the sort
Speaker 1: of modus operandi here of having abandon, testify or indeed deposed,
Speaker 1: let's say, by Robert Mueller and the investigation, Because isn't
Speaker 1: this really just about what action happened. It's not about
Speaker 1: who said what to whom, It's about what actually happened.
Speaker 1: That's true we probably don't want to divide public hearing
Speaker 1: in front of Congress from a private conversation with an
Speaker 1: official of the Department of Justice, And in fact, the
Speaker 1: courts have treated those differently. Um, when it comes to
Speaker 1: a conversation with Mueller, if Mueller issues a subpoena, then
Speaker 1: there's good solid Supreme Court President going all the way
Speaker 1: back to the nixt and Watergate TPS case, which says
Speaker 1: that any interest of president has some confidentiality is going
Speaker 1: to be overridden by the need of the Department of
Speaker 1: Justice and of the courts ultimately to get the fact
Speaker 1: in a criminal investigation, and that conversation is going to
Speaker 1: be inevitably about whether laws were broken, and that's gonna trump.
Speaker 1: On the other hand, a congressional inquirer can go a
Speaker 1: lot further because Congress is not merely investigating where there
Speaker 1: was wrongdoing, but also what happened, you know, how was
Speaker 1: foreign policy made, what was said, and who was speaking.
Speaker 1: And unlike a lawyer who's asking questions under conditions of
Speaker 1: a criminal case, a congress person can ask almost anything
Speaker 1: in the course of a h an investigation, in the
Speaker 1: course of a of a hearing, and their interest is
Speaker 1: in politics, not only in and who broke the law,
Speaker 1: and that could potentially be be further reaching, and there's
Speaker 1: a different legal regime governing it because that's about a
Speaker 1: conflict between Congress and the president rather than between the
Speaker 1: judiciary and the precedent. Well, no, maybe then you can
Speaker 1: offer your thoughts because you've written a variety of books,
Speaker 1: the most recent of one is The Three Lives of
Speaker 1: James Madison, Genius, Partisan and President. And at what point
Speaker 1: does all of this become such inside baseball that uh,
Speaker 1: you know, investors look at it and go all right,
Speaker 1: So we'll let the legal system run its course, but
Speaker 1: that's not really going to affect what happens in terms
Speaker 1: of Washington because at least right now, nothing's happening and
Speaker 1: we can't even get a budget. Well, look, I totally
Speaker 1: agree that there does be an extraordinary degree of conflict
Speaker 1: going on, and that's the luckily the job of the
Speaker 1: politicians to sort out, and I think the market group
Speaker 1: generally leave that to the politicians. Here, we really should
Speaker 1: clearly distinguish two things. One is the criminal investigation of
Speaker 1: the president and his associates, which is ongoing. Mueller will
Speaker 1: engage in the most aggressive of lawful ethical investigation that
Speaker 1: that he can engage in, and it's important to understend
Speaker 1: that that will include being able to question Bannon about
Speaker 1: anything that Bannon may have seen or heard that would
Speaker 1: cross the line into illegal conduct. And no claim of
Speaker 1: executive village is going to defend uh the executive branch
Speaker 1: or Bannon or President Trump against that. Separately, there's a
Speaker 1: question of the struggle, the two years struggle between Congress
Speaker 1: and the president over who gets to keep what's secret,
Speaker 1: and there I think you're right to see this as
Speaker 1: kind of inside baseball wrangling with the presidents. He trying
Speaker 1: to say as little as possible, in Congress trying to
Speaker 1: find out as much as possible, And in fact, our
Speaker 1: system expects that to be worked out by negotiations. Unfortunately,
Speaker 1: in our current era, negotiation between the two sides is
Speaker 1: harder than it's than it's ever been. But that's nevertheless
Speaker 1: the way our system is set up. Congress and the
Speaker 1: President are supposed to work this out amongst themselves. You know,
Speaker 1: there's a lot of talk right now about you know, well,
Speaker 1: there's by us on both sides. There's by us in
Speaker 1: the part of Muller and his team there's by us
Speaker 1: in the part of the FBI, UH and and people
Speaker 1: saying that that these investigations need to go on because
Speaker 1: President Trump has engaged in some behavior or may have
Speaker 1: that is problematic. I'm just wondering, from a legal perspective,
Speaker 1: does the partisan bickering has it sort of reached in
Speaker 1: and muddied the legal waters yet? Have there been any
Speaker 1: moves made that undermine the legal integrity going on here?
Speaker 1: Not yet. I would say that right now. Within the
Speaker 1: legal community broadly, and I'm talking about lawyers, judges to
Speaker 1: some degree when they speak off the record, um legal experts,
Speaker 1: the general perception very strongly is that Mueller and his
Speaker 1: team are seasoned, experienced prosecutors who are as objective as
Speaker 1: human beings are able to be. I think there's a
Speaker 1: strong belief that if there's nothing to be shown in
Speaker 1: the investigation, Muller and his team will say there's nothing
Speaker 1: to be shown, that if there are crimes, they will
Speaker 1: reveal them, and whatever their nature is, they will they
Speaker 1: will pursue them. I think the political screen is seen
Speaker 1: as attempting to shape and effect the process of that
Speaker 1: investigation that has not yet happened. I think that of
Speaker 1: course that's a possibility, but it remains not the case
Speaker 1: to this moment. I think, you know, we got Unfortunately,
Speaker 1: we gotta leave it there. We've gotta run. Noah Feldman
Speaker 1: is the Felix Frankfurter Professor of Law at Harvard University
Speaker 1: and a Bloomberg View columnist. He can be followed on
Speaker 1: Twitter at Noah R. Feldman. You're listening to Bloomberg Markets
Speaker 1: with them Fox and Lisa Abramowitz on Bloomberg Radio. Bloomberg
Speaker 1: Markets brought you by Bild. America Mutual BAM has ensured
Speaker 1: more than forty billion dollars of municipal bonds for essential
Speaker 1: public projects across the US. They're high double A credit
Speaker 1: rating from SMP helps infrastructure infrastructure dollars go further, Build
Speaker 1: America dot Com BAM. Well, right now we are hearing
Speaker 1: a lot of comparisons drawn between President Trump of the
Speaker 1: US and President Jean Ping of China, and that will
Speaker 1: only get ramped up next week as we have the
Speaker 1: Davos World Economic Forum Annual Shindig, and here to talk
Speaker 1: about really some of the comparisons and perhaps the h
Speaker 1: the misimpressions are the false impressions that some people are
Speaker 1: getting is Elizabeth Economy. She's cv STAR Senior Fellow and
Speaker 1: Director for Asia Studies for the Council of Foreign Relations,
Speaker 1: and she joins us. Now, Elizabeth, thank you so much
Speaker 1: for being with us. I wanted to touch base with
Speaker 1: you because there is this impression that President Jim Ping
Speaker 1: of China is kind of taking that nation to the
Speaker 1: forefront of global domination and managing global affairs and frankly
Speaker 1: best in the US in some ways, as President Trump
Speaker 1: sort of takes more of a protectionist stance. Do you
Speaker 1: think that people are getting the wrong impression? I do,
Speaker 1: and and thanks for having me. Um. I think it
Speaker 1: is certainly true that President Trump has taken a step
Speaker 1: back from the traditional role of the United States as
Speaker 1: globe leader. There's no doubt about it. We've seen him,
Speaker 1: you know, withdraw from the proposed Transpacific Partnership, take a
Speaker 1: step back certainly on climate change, on various United Nations initiatives,
Speaker 1: and obviously in terms of migration UH and immigration issues. UM.
Speaker 1: But that is not to say that simply because the
Speaker 1: United States is somewhat in retreat, that China is ready
Speaker 1: to assume the mantle of global leadership. I think she didn't.
Speaker 1: Ping has certainly made his interest in taking on that
Speaker 1: role clear, But when you actually look at what China
Speaker 1: is doing, it becomes clear that first of all, China
Speaker 1: is not a leader or a defender of globalization as
Speaker 1: a she didn't being asserted last year in Davos, but
Speaker 1: also really has not stepped up to the plate to
Speaker 1: lead on any number of global issues, from the refugee
Speaker 1: crisis to climate change, um to you know, sort of
Speaker 1: the openness of its markets. Um so. I think it
Speaker 1: bears us looking hard at the facts on the ground
Speaker 1: to understand the reality of China's actions as opposed to
Speaker 1: the rhetoric of Sijin Ping and a lot of media
Speaker 1: hype frankly that has surrounded Sijin Pings leadership of China.
Speaker 1: Your forthcoming books entitled The Third Revolution, Jing Ping and
Speaker 1: the New Chinese State, can you tell us about this
Speaker 1: new Chinese State? And from an investor perspective, what should
Speaker 1: we take away about what you describe as the contradictory
Speaker 1: nature of reform under the Chinese president. Certainly so, I
Speaker 1: mean over the past thirty years, um, you know, there's
Speaker 1: been an understanding I think broadly both within China and
Speaker 1: certainly in the international community that has China's developing, Its
Speaker 1: markets are going to continue to open, Its political system
Speaker 1: is going to continue to liberalize and to reform. But
Speaker 1: if we look at the past five years under Sijin
Speaker 1: Pings leadership, he's really turned those kinds of assumptions uh
Speaker 1: on their collective heads. And so what we've seen in
Speaker 1: China under she's really uh, you know, a return to
Speaker 1: the strongman leadership, a centralization of authority under Shi Jin
Speaker 1: Ping's personal uh leadership, so you no longer have the
Speaker 1: kind of collective leadership that you have. You've seen an
Speaker 1: increasing penetration of the Communist Party into society and into
Speaker 1: the economy for example, uh, you know, the party committees
Speaker 1: wanting to make investment decisions for state don't enterprises or
Speaker 1: for even joint ventures that are done with multinationals. I
Speaker 1: think most recently we saw that the Communist Party has
Speaker 1: said they're going to take a stake in China's largest
Speaker 1: technology companies like Ali Baba, Intense cent Um. You know,
Speaker 1: this is not the direction in which we thought the
Speaker 1: Chinese government was going to uh to move. So we've
Speaker 1: seen a strengthening of the state don't enterprises under Shi
Speaker 1: jin Ping, and a lot of people thought that it
Speaker 1: wasn't going to move this way, right if they look
Speaker 1: back to two thousand and thirteen and the Third Plan
Speaker 1: with the eighteenth Party Congress, when a lot of people
Speaker 1: here in the United States said, wow, look at this document.
Speaker 1: It talks a lot about the market being a decisive force.
Speaker 1: That was true, but what they missed was that the
Speaker 1: state was going to remain in command of the economy.
Speaker 1: And certainly we've seen Si Jinping, you know, dramatically restrict
Speaker 1: the outward flow of capital over the past year, right,
Speaker 1: putting a reigning in a lot of overseas investments. So
Speaker 1: a lot of changes that move in the other direction,
Speaker 1: you know, as opposed to liberalization. Well, but but when
Speaker 1: it when it comes to just investors and and the
Speaker 1: Chinese markets, I mean, we just saw that GDP reading
Speaker 1: for and you know, a lot of people might say
Speaker 1: that those numbers are totally fudged, very difficult to really
Speaker 1: glean any any truth from, but they showed the first
Speaker 1: acceleration and the most meaningful acceleration since in the Chinese
Speaker 1: economic growth outlook. I mean, is this a bad thing,
Speaker 1: especially as the economy does open up at least two banks.
Speaker 1: I mean having having a larger presence there for in
Speaker 1: banks having a larger presence in China, I mean as
Speaker 1: an investor, isn't it you know they're still managing it well.
Speaker 1: I would say this first of all, Um, I think
Speaker 1: it's it's right to be cautious about Chinese numbers. And
Speaker 1: everybody knows this, and everybody says this, Um, But you
Speaker 1: just have to look at the most recent statements from
Speaker 1: you know, Tien's in one of China's most productive, largest
Speaker 1: economic regions, where they said that they inflated their growth
Speaker 1: in seen by a third, or what just came out
Speaker 1: from Inner Mongolia, you know, a heavy industrial center for China,
Speaker 1: where they said that their estimates fort over what they
Speaker 1: actually were. Just to say, let's let's not get overly
Speaker 1: excited over the six point nine percent that we've seen
Speaker 1: this year, because we don't really know the reality. We
Speaker 1: won't really know the reality for at least another year. Um.
Speaker 1: Having said that, you know, China continues to grow, and
Speaker 1: it's part of Jin Pink's pledge that he's going to
Speaker 1: double per capita g d P between two thousand ten
Speaker 1: and two thousand and twenty, and that requires that between
Speaker 1: two thousand and sixteen and two thousand twenty that g
Speaker 1: d P grow on an average of six and a
Speaker 1: half percent. So whatever is actually happening the Chinese economy,
Speaker 1: you're going to see numbers that are gonna make sure
Speaker 1: that that GDP per cabin is doubled by And as
Speaker 1: far as what it means for investors in China, I
Speaker 1: would only point to both European Chamber of Commerce and
Speaker 1: American Chamber of Commerce reports over the past several years
Speaker 1: that talk about the increasing difficulty of doing business in
Speaker 1: China these days. Uh. And while you're right that there
Speaker 1: was a recent opening for banks that came about after
Speaker 1: the Trump she meeting, um, in fact, what I've understood
Speaker 1: is that this is a little bit too little, too late, right,
Speaker 1: that there's not that much room at this point for
Speaker 1: foreign banks to to take on a you know, a
Speaker 1: bigger share of the Chinese market because the Chinese have
Speaker 1: protected it for so long that you know, Chinese banks
Speaker 1: now basically command the banking system. So, you know, I
Speaker 1: think that's a challenge that many American companies are going
Speaker 1: to face at the United States is going to face
Speaker 1: as it continues to press China to open up more
Speaker 1: sectors of its economy that in fact, China is going
Speaker 1: to wait until it really commands those sectors and then say, sure,
Speaker 1: we welcome you in. Of course you're not going to
Speaker 1: be able to compete, but have at it. Thank you
Speaker 1: very much for being with us. Elizabeth Economy, CV STAR,
Speaker 1: Senior Fellow and Director for Asia Studies at the Council
Speaker 1: of Foreign Relations. She can be followed on Twitter at
Speaker 1: Liz Economy. Thanks for listening to the Bloomberg P and
Speaker 1: L podcast. You can subscribe and listen to interviews at
Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm
Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on
Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You
Speaker 1: can always catch us worldwide on Bloomberg Radio.