1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg pm L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. 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 --> 00:00:32,360 Speaker 1: podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. We 7 00:00:32,440 --> 00:00:37,560 Speaker 1: are seeing UH oil prices slump, the worst route UH 8 00:00:37,640 --> 00:00:40,599 Speaker 1: in two years. Here to speak with us about what 9 00:00:40,640 --> 00:00:43,479 Speaker 1: we can expect going forward and how investors are kind 10 00:00:43,479 --> 00:00:46,760 Speaker 1: of positioning around this from a credit perspective. Sharam Honari, 11 00:00:46,880 --> 00:00:50,360 Speaker 1: she's he's partner of black Gold Capital Management, which overseas 12 00:00:50,520 --> 00:00:53,800 Speaker 1: one point to billion dollars from Houston, Texas. But he 13 00:00:53,880 --> 00:00:56,640 Speaker 1: joins us from our eleven three oh studios in New York. Sharon, 14 00:00:56,720 --> 00:00:59,040 Speaker 1: thank you so much for joining us. I want to 15 00:00:59,080 --> 00:01:03,400 Speaker 1: get your perspective, if from you know, a credit investor standpoint, 16 00:01:03,800 --> 00:01:08,440 Speaker 1: as you see oil prices dip lower, what's our biggest concern? Well, 17 00:01:08,440 --> 00:01:10,840 Speaker 1: I think from our perspective, you know, we've actually had 18 00:01:10,840 --> 00:01:13,960 Speaker 1: a viewpoint that the commodity would be range bound forty 19 00:01:14,000 --> 00:01:16,440 Speaker 1: to sixty dollars. UH. You know, we invest up and 20 00:01:16,440 --> 00:01:19,080 Speaker 1: down the capital structure of energy companies, and and from 21 00:01:19,120 --> 00:01:22,600 Speaker 1: that perspective, the you know, the daily swings in oil 22 00:01:22,640 --> 00:01:25,399 Speaker 1: prices don't really impact our credits as much as they 23 00:01:25,400 --> 00:01:27,840 Speaker 1: probably did when oil went from a hundred ten uh, 24 00:01:27,840 --> 00:01:30,720 Speaker 1: you know, just twenty six dollars a barrel. As we've seen, 25 00:01:31,080 --> 00:01:33,880 Speaker 1: you know, after kind of this history doric dislocation in 26 00:01:33,920 --> 00:01:36,520 Speaker 1: the in the credit markets, we've obviously seen uh, you know, 27 00:01:36,600 --> 00:01:39,280 Speaker 1: rebound and in crude prices about fifty nine dollars a barrel. 28 00:01:39,360 --> 00:01:42,080 Speaker 1: Companies have really been focusing on their balance sheets. They've 29 00:01:42,080 --> 00:01:46,200 Speaker 1: been cutting distributions, selling assets, increasing their efficiencies. Really those 30 00:01:46,240 --> 00:01:50,120 Speaker 1: are all credit positive type of actions. So from our perspective, 31 00:01:50,240 --> 00:01:52,680 Speaker 1: if you look at the market today, it's obviously very 32 00:01:52,760 --> 00:01:55,880 Speaker 1: challenging for energy equities in particular. Energy equities were down 33 00:01:55,920 --> 00:01:58,440 Speaker 1: last year, they're down this year again. Uh. There continues 34 00:01:58,480 --> 00:02:00,560 Speaker 1: to obviously be a lot of stress, uh in the 35 00:02:00,680 --> 00:02:04,040 Speaker 1: energy arena, But investors at this point of really demanding 36 00:02:04,280 --> 00:02:07,160 Speaker 1: you know, return on invested capital, and it's really forcing 37 00:02:07,160 --> 00:02:09,079 Speaker 1: companies again to improve their balance sheets. And I think 38 00:02:09,080 --> 00:02:12,359 Speaker 1: that's really a positive for credit. What is the collateral 39 00:02:12,440 --> 00:02:15,840 Speaker 1: to most of this energy credit. Well, I think it 40 00:02:15,840 --> 00:02:18,400 Speaker 1: depends on obviously the the type of company. But if 41 00:02:18,400 --> 00:02:20,440 Speaker 1: you're you're looking at you know e, m p S, 42 00:02:20,480 --> 00:02:23,360 Speaker 1: obviously it's the the assets of PDP value and oil 43 00:02:23,360 --> 00:02:26,360 Speaker 1: field services a different type of dynamic. Uh. And obviously 44 00:02:26,360 --> 00:02:28,280 Speaker 1: the midstream we really like the midstream space that a 45 00:02:28,320 --> 00:02:30,280 Speaker 1: lot of the infrastructure that's in the ground, we really 46 00:02:30,280 --> 00:02:33,640 Speaker 1: think that can't re replaced. So you're talking about the 47 00:02:33,720 --> 00:02:39,440 Speaker 1: actual refineries and the pipelines or or or the assets 48 00:02:39,440 --> 00:02:41,560 Speaker 1: you set assets in the ground. So is that the 49 00:02:41,680 --> 00:02:43,680 Speaker 1: natural gas and the oil in the ground. Just trying 50 00:02:43,680 --> 00:02:46,160 Speaker 1: to understand. Yeah, it depends on again what subsector. If 51 00:02:46,160 --> 00:02:48,400 Speaker 1: you're looking at the midstream space, we're talking about process 52 00:02:48,440 --> 00:02:51,000 Speaker 1: and gathering. If you're looking to exploration companies, that's really 53 00:02:51,000 --> 00:02:53,560 Speaker 1: the oil and gas in the ground. So sure you 54 00:02:53,600 --> 00:02:56,800 Speaker 1: were saying, uh in a note of that you put 55 00:02:56,840 --> 00:02:59,639 Speaker 1: out earlier, that you think that there is an opportunity 56 00:02:59,680 --> 00:03:04,839 Speaker 1: and offering financing to high yield companies, specutive great companies. Uh, 57 00:03:04,880 --> 00:03:07,920 Speaker 1: that's within them one hundred to three hundred million dollar range. 58 00:03:07,960 --> 00:03:09,799 Speaker 1: Can you talk a little bit about that. Yeah, I 59 00:03:09,840 --> 00:03:12,280 Speaker 1: think that's really a part of the dynamic that's really 60 00:03:12,600 --> 00:03:14,240 Speaker 1: changed over the last couple of years. Again, if you 61 00:03:14,280 --> 00:03:17,800 Speaker 1: look at the energy space from two thousand fourteen on, obviously, 62 00:03:17,840 --> 00:03:20,280 Speaker 1: you know we had two plus bankruptcies in the space. 63 00:03:20,280 --> 00:03:23,000 Speaker 1: There was really a survivorship bias. Again, companies focused on 64 00:03:23,040 --> 00:03:24,919 Speaker 1: their balance sheets, but a lot of banks had a 65 00:03:24,919 --> 00:03:27,400 Speaker 1: tremendous amount of exposure to the energy space, and the 66 00:03:27,440 --> 00:03:30,200 Speaker 1: Office of the Controller has basically forced a lot of 67 00:03:30,200 --> 00:03:32,960 Speaker 1: the banks to continue to decrease their exposure. So if, 68 00:03:33,000 --> 00:03:34,960 Speaker 1: for example, you look at the e MP space right now, 69 00:03:35,080 --> 00:03:38,280 Speaker 1: companies there are three times plus levered. Banks really can't 70 00:03:38,520 --> 00:03:41,240 Speaker 1: lend to those type of entities. And for folks like us, 71 00:03:41,520 --> 00:03:43,160 Speaker 1: there's an aspect of the market where I would say 72 00:03:43,200 --> 00:03:46,080 Speaker 1: hundred to three hundred million dollar type of range. There 73 00:03:46,080 --> 00:03:49,200 Speaker 1: really is a scarcity of capital for those type of companies, 74 00:03:49,200 --> 00:03:51,440 Speaker 1: and we're trying to fill that void. Then the beauty 75 00:03:51,520 --> 00:03:53,800 Speaker 1: I think of of that smaller kind of subsid is 76 00:03:53,840 --> 00:03:55,920 Speaker 1: you know, you go three hundred million above that's where 77 00:03:55,920 --> 00:03:57,880 Speaker 1: people have access to the high yield markets or leverage 78 00:03:57,920 --> 00:03:59,960 Speaker 1: loan market, but below that that's not really the case. 79 00:04:00,240 --> 00:04:03,400 Speaker 1: Are you doing that with direct lending or with bespoke 80 00:04:03,440 --> 00:04:06,680 Speaker 1: bond offerings or yeah, for us, I'll give you an example. 81 00:04:06,680 --> 00:04:09,320 Speaker 1: I mean, we actually just did a direct lending deal 82 00:04:09,400 --> 00:04:12,240 Speaker 1: to a company called Atlas Sands and the Permian. It's 83 00:04:12,240 --> 00:04:15,280 Speaker 1: actually a company that was started by a Bud Brigham 84 00:04:15,280 --> 00:04:17,680 Speaker 1: who's very well known in the energy space. They put 85 00:04:17,680 --> 00:04:20,000 Speaker 1: in about two hundred million dollars worth of equally, we 86 00:04:20,080 --> 00:04:22,360 Speaker 1: provided them with a hundred fifty million dollar first lane 87 00:04:22,680 --> 00:04:24,919 Speaker 1: and really the success there on our part was, you know, 88 00:04:24,960 --> 00:04:27,159 Speaker 1: we've we're based in Houston, we've known but in his 89 00:04:27,200 --> 00:04:30,359 Speaker 1: team for ten fifteen plus years. Uh, they decided to 90 00:04:30,400 --> 00:04:32,239 Speaker 1: do the deal with us rather than with other folks. 91 00:04:32,839 --> 00:04:35,000 Speaker 1: So can you tell us what is the interest rate 92 00:04:35,000 --> 00:04:37,760 Speaker 1: on a hundred and fifty million that you loaned that 93 00:04:37,800 --> 00:04:40,240 Speaker 1: particular thing? I cannot actually share that with you. That's 94 00:04:40,279 --> 00:04:42,440 Speaker 1: kind of a private transaction, but it will give us 95 00:04:42,440 --> 00:04:45,120 Speaker 1: an idea then of what would be the cost to 96 00:04:45,480 --> 00:04:48,200 Speaker 1: that kind of borrower and what kind of duration are 97 00:04:48,240 --> 00:04:50,160 Speaker 1: we talking about? Yeah, I think for we're looking at 98 00:04:50,200 --> 00:04:53,200 Speaker 1: kind of double digit type of returns. That's actually actually 99 00:04:53,200 --> 00:04:57,719 Speaker 1: a five year loan for this particular transaction. So firstly, 100 00:04:57,760 --> 00:04:59,479 Speaker 1: in a piece of paper, I thought it was really 101 00:04:59,520 --> 00:05:01,600 Speaker 1: interesting that you're saying that regulators are still correcting down 102 00:05:01,640 --> 00:05:04,040 Speaker 1: on banks and having them reduce their exposure to energy. 103 00:05:04,600 --> 00:05:07,680 Speaker 1: Uh is that continuing today or that was just throughout 104 00:05:07,760 --> 00:05:10,160 Speaker 1: last year. No, it's actually continuing today. I mean our 105 00:05:10,200 --> 00:05:12,880 Speaker 1: offices in Houston, we have bankers coming through all all 106 00:05:12,920 --> 00:05:16,000 Speaker 1: the time. You know, they're looking to partner with us 107 00:05:16,160 --> 00:05:18,359 Speaker 1: to basically liquidate some of the assets that they just 108 00:05:18,400 --> 00:05:21,960 Speaker 1: can't hold on their books. At what price level does 109 00:05:22,000 --> 00:05:26,599 Speaker 1: it become a real problem to maintain these credits or 110 00:05:26,680 --> 00:05:30,040 Speaker 1: to lend even more money to the industry. Well, I 111 00:05:30,040 --> 00:05:31,720 Speaker 1: think you looked at one of one of the aspects 112 00:05:31,720 --> 00:05:34,200 Speaker 1: I think that's really been changing in this industry overall 113 00:05:34,279 --> 00:05:36,080 Speaker 1: is if you look at, for example, energy equities, they've 114 00:05:36,080 --> 00:05:38,880 Speaker 1: been underperforming for a decade. I think a lot of 115 00:05:38,920 --> 00:05:42,320 Speaker 1: investors are also taking a step back. You're seeing it also, 116 00:05:42,400 --> 00:05:45,280 Speaker 1: you know New York State Pension here, the suing Exxon 117 00:05:45,520 --> 00:05:47,600 Speaker 1: and the like, and they're actually divesting their assets. So 118 00:05:47,640 --> 00:05:50,440 Speaker 1: I think that's part of the aspect of scarcity of 119 00:05:50,560 --> 00:05:53,960 Speaker 1: capital going forward. Where there's a need, there continues to 120 00:05:54,000 --> 00:05:55,880 Speaker 1: be a need. Banker stepping back. Obviously, there's a lot 121 00:05:55,880 --> 00:05:58,280 Speaker 1: of private equity firms folks like US that are trying 122 00:05:58,320 --> 00:06:00,960 Speaker 1: to ultimately fill that void in the market place. Thanks 123 00:06:01,040 --> 00:06:04,680 Speaker 1: very much, Sharram Jnari. He's the partner of black Gold 124 00:06:04,800 --> 00:06:21,640 Speaker 1: Capital Management, talking about credit and the energy markets. We 125 00:06:21,720 --> 00:06:25,239 Speaker 1: are broadcasting live from the Golden Sacks ten thousand Small 126 00:06:25,320 --> 00:06:28,160 Speaker 1: Business Summit at the Washington Hilton in Washington, d C. 127 00:06:28,839 --> 00:06:31,960 Speaker 1: It is brought to you by Sage Business Cloud Financials, 128 00:06:32,000 --> 00:06:35,440 Speaker 1: a powerful cloud accounting solution built on the Salesforce platform 129 00:06:35,520 --> 00:06:39,400 Speaker 1: to empower businesses to scale without complexity. More at Sage 130 00:06:39,440 --> 00:06:44,120 Speaker 1: dot com slash Financials. Uh So, I'm we're very lucky 131 00:06:44,160 --> 00:06:46,440 Speaker 1: to have Katie Coach here with us. She's Global head 132 00:06:46,440 --> 00:06:50,960 Speaker 1: of Fundamental Equity Client Portfolio Management at Goldman Sachs Asset Management. 133 00:06:50,960 --> 00:06:53,240 Speaker 1: And Katie, before we sort of dig into what's been 134 00:06:53,240 --> 00:06:56,680 Speaker 1: going on in the markets, why are you here? Um? So, 135 00:06:56,760 --> 00:06:58,719 Speaker 1: First of all, thank you so much for having me 136 00:06:58,760 --> 00:07:00,680 Speaker 1: on the program. Um We are here. This is the 137 00:07:00,760 --> 00:07:04,760 Speaker 1: largest gathering ever in the US for small businesses. Um 138 00:07:04,839 --> 00:07:07,039 Speaker 1: And we're here because at Goldman Sacks we think that 139 00:07:07,120 --> 00:07:11,080 Speaker 1: it is incredibly important to support small businesses as a 140 00:07:11,120 --> 00:07:14,280 Speaker 1: way to increase the overall economic health of the economy. 141 00:07:14,440 --> 00:07:16,760 Speaker 1: It's a program that we've had for eight years, We've 142 00:07:16,800 --> 00:07:20,680 Speaker 1: reached sixty d businesses. We're bringing those business owners and 143 00:07:20,840 --> 00:07:24,640 Speaker 1: entrepreneurs education, um, and we're also giving them connections and 144 00:07:24,680 --> 00:07:28,280 Speaker 1: access to capital. So Katie, I guess, um, it would 145 00:07:28,280 --> 00:07:31,280 Speaker 1: be good to connect this to what we're seeing in markets. 146 00:07:31,320 --> 00:07:35,200 Speaker 1: We're seeing a lot more volatility. We're seeing the specter 147 00:07:35,520 --> 00:07:37,760 Speaker 1: for rising interest rates, with even so much gold in 148 00:07:37,760 --> 00:07:40,680 Speaker 1: success Management predicting that UH tenure treasure YELD could go 149 00:07:40,720 --> 00:07:43,679 Speaker 1: up to three point five percent in the next six months. 150 00:07:44,240 --> 00:07:48,480 Speaker 1: When does this bleed into consume business small business confidence? 151 00:07:48,480 --> 00:07:51,120 Speaker 1: What does this bleed into the real economy? Right? So, Um, 152 00:07:51,160 --> 00:07:54,960 Speaker 1: I think we we should really separate what's happening in markets, 153 00:07:55,000 --> 00:07:58,120 Speaker 1: which is about volatility. Um I would argue that actually 154 00:07:58,160 --> 00:08:01,400 Speaker 1: volatility needed to normalize. No one promised that was going 155 00:08:01,400 --> 00:08:03,920 Speaker 1: to be an orderly process that rarely rarely is, but 156 00:08:04,200 --> 00:08:06,200 Speaker 1: it is good to get to more normal levels of 157 00:08:06,280 --> 00:08:09,800 Speaker 1: volatility in markets. UM. And what I would say is 158 00:08:09,800 --> 00:08:12,120 Speaker 1: that you need to separate that from what you referred 159 00:08:12,160 --> 00:08:15,000 Speaker 1: to as the real economy. When we look at the markets, 160 00:08:15,000 --> 00:08:17,000 Speaker 1: they're volatile, yes, but it needs to normalize. When we 161 00:08:17,000 --> 00:08:19,040 Speaker 1: look at the real economy, it actually continues to be 162 00:08:19,080 --> 00:08:21,760 Speaker 1: incredibly healthy. Um. And when I'm out there talking to 163 00:08:21,800 --> 00:08:25,200 Speaker 1: these small business owners, they feel incredibly optimistic about the 164 00:08:25,200 --> 00:08:28,200 Speaker 1: opportunities set in front of them. And that is anecdotal 165 00:08:28,240 --> 00:08:30,840 Speaker 1: to these business owners. But actually the n f IB, 166 00:08:31,080 --> 00:08:33,920 Speaker 1: the National Federation for Independent Businesses, came out with some 167 00:08:34,000 --> 00:08:37,240 Speaker 1: data overnight where they're looking at a very broad population 168 00:08:37,320 --> 00:08:40,200 Speaker 1: of small business owners and asking them the question, what 169 00:08:40,360 --> 00:08:42,079 Speaker 1: you know, what is your level of optimism and is 170 00:08:42,120 --> 00:08:44,200 Speaker 1: this a good time to expand businesses? And what what 171 00:08:44,280 --> 00:08:46,760 Speaker 1: you see in that survey data is that we're at 172 00:08:46,800 --> 00:08:49,920 Speaker 1: record high levels. Uh So Main Street is actually roaring 173 00:08:49,960 --> 00:08:52,320 Speaker 1: in the US. That's extremely good news for the economy. 174 00:08:52,360 --> 00:08:54,760 Speaker 1: It doesn't mean it's going to translate into perfect equity markets. 175 00:08:54,800 --> 00:08:56,800 Speaker 1: There's gonna be ups and downs, as we've seen. But 176 00:08:56,840 --> 00:08:59,520 Speaker 1: if you actually feel pretty good about the underlying economic 177 00:08:59,559 --> 00:09:02,400 Speaker 1: trajectory here over time, that should be good for risk 178 00:09:02,440 --> 00:09:06,040 Speaker 1: assets as well, Katie. Earlier today I got the chance 179 00:09:06,080 --> 00:09:08,960 Speaker 1: to speak with one of the attendees here. UM. The 180 00:09:08,960 --> 00:09:13,360 Speaker 1: Debka sen is the owner and operator of a classic 181 00:09:13,559 --> 00:09:17,640 Speaker 1: tours collection. They're based in Redonda Beach, California, and she 182 00:09:17,760 --> 00:09:19,680 Speaker 1: told me that one of the things that she has 183 00:09:19,840 --> 00:09:24,280 Speaker 1: learned from these Goldman Sachs events is not just how 184 00:09:24,320 --> 00:09:28,280 Speaker 1: to operate her business in her industry, but how to 185 00:09:28,360 --> 00:09:32,200 Speaker 1: operate her business in her community and how she had 186 00:09:32,280 --> 00:09:36,320 Speaker 1: not necessarily understood that role. And I'm wondering if you 187 00:09:36,360 --> 00:09:40,320 Speaker 1: could just maybe twin that with something that Goldman Sachs 188 00:09:40,440 --> 00:09:45,080 Speaker 1: is doing with the online lender Marcus, because one of 189 00:09:45,080 --> 00:09:47,720 Speaker 1: the points that she made is not everything is a 190 00:09:47,760 --> 00:09:52,080 Speaker 1: sales call, and that it is sometimes difficult to remember 191 00:09:52,080 --> 00:09:55,560 Speaker 1: that as a small business, the sales cycle can be 192 00:09:55,760 --> 00:09:57,920 Speaker 1: long and you don't know where that next sale is 193 00:09:57,960 --> 00:10:01,360 Speaker 1: going to come from, right so income when we work 194 00:10:01,400 --> 00:10:04,280 Speaker 1: with these businesses, it's great that she has the learned 195 00:10:04,280 --> 00:10:06,400 Speaker 1: that from the ten thousand Small Business program, that she 196 00:10:06,440 --> 00:10:08,400 Speaker 1: has to be a successful business but also has to 197 00:10:08,400 --> 00:10:11,160 Speaker 1: be thoughtful about um how she interacts and works with 198 00:10:11,200 --> 00:10:13,240 Speaker 1: the community. And I would say that that is on 199 00:10:13,320 --> 00:10:15,439 Speaker 1: two levels. The first is, of course, many of these 200 00:10:15,480 --> 00:10:18,240 Speaker 1: businesses are sourcing from the community for their talent, and 201 00:10:18,280 --> 00:10:20,880 Speaker 1: so they're hiring locally. And one of when we look 202 00:10:20,880 --> 00:10:23,280 Speaker 1: at the challenges that these small business owners point to, 203 00:10:23,360 --> 00:10:25,520 Speaker 1: there's really three main ones and and and the first 204 00:10:25,559 --> 00:10:28,600 Speaker 1: amongst those is attracting and retaining employees, which they're usually 205 00:10:28,600 --> 00:10:31,120 Speaker 1: sourcing from the community. And so one of the solutions 206 00:10:31,120 --> 00:10:33,400 Speaker 1: that we're putting forward in this program is to help 207 00:10:33,440 --> 00:10:35,320 Speaker 1: people we train them on how to to find the 208 00:10:35,360 --> 00:10:37,920 Speaker 1: right talent locally. But then we also think the government 209 00:10:37,960 --> 00:10:40,640 Speaker 1: should step in and help give, for example, tax credits 210 00:10:41,120 --> 00:10:43,680 Speaker 1: for people in terms of training employees, because when we 211 00:10:43,720 --> 00:10:46,600 Speaker 1: invest in employees, were ultimately investing in the economy. So 212 00:10:46,640 --> 00:10:49,160 Speaker 1: that's one thing about interacting with the community locally is 213 00:10:49,160 --> 00:10:51,959 Speaker 1: about hiring. The second thing, which you pointed to, is 214 00:10:52,000 --> 00:10:54,560 Speaker 1: about access to credit and capital, which continues to be 215 00:10:54,600 --> 00:10:57,640 Speaker 1: a major challenge um for these small business owners. And 216 00:10:57,679 --> 00:11:00,320 Speaker 1: the regulation that we've had since the financial crisis means 217 00:11:00,320 --> 00:11:03,080 Speaker 1: that it's actually been more challenging for these small business 218 00:11:03,080 --> 00:11:06,280 Speaker 1: owners to tap credit and capital um because they're often 219 00:11:06,320 --> 00:11:08,360 Speaker 1: actually having to do that off of a personal balance 220 00:11:08,400 --> 00:11:12,160 Speaker 1: sheet and that's become much more restrict credit card yes exactly. 221 00:11:12,200 --> 00:11:14,480 Speaker 1: So really when you talk to these business owners, their 222 00:11:14,480 --> 00:11:17,200 Speaker 1: credit cards have been their working capital, right and so 223 00:11:17,240 --> 00:11:19,560 Speaker 1: the rates are high and also we've had less access 224 00:11:19,600 --> 00:11:21,240 Speaker 1: to credit coming out of the crisis, and that's been 225 00:11:21,280 --> 00:11:23,920 Speaker 1: a real challenge for people in scaling their businesses and 226 00:11:23,960 --> 00:11:26,079 Speaker 1: so connecting it to to what we're trying to do here. 227 00:11:26,080 --> 00:11:28,640 Speaker 1: We work with a lot of local organizations, UM and 228 00:11:28,720 --> 00:11:32,040 Speaker 1: helping those organizations extend and make loans to small businesses 229 00:11:32,520 --> 00:11:34,559 Speaker 1: because it is about retaining people. And then the other 230 00:11:35,160 --> 00:11:37,520 Speaker 1: challenge which you brought up is also about access to 231 00:11:37,559 --> 00:11:39,400 Speaker 1: credit to keep the business going and be able to 232 00:11:39,440 --> 00:11:42,800 Speaker 1: scale it. So just really quickly, at what point will 233 00:11:42,920 --> 00:11:46,160 Speaker 1: treasure yields rise enough that it will become restrictive for 234 00:11:46,360 --> 00:11:49,839 Speaker 1: small businesses to borrow? Yeah, so, UM, listen, we're I 235 00:11:49,880 --> 00:11:52,480 Speaker 1: think it's important to recognize we're coming off of incredibly 236 00:11:52,559 --> 00:11:54,880 Speaker 1: low rates here, so three and a half percent, I 237 00:11:55,240 --> 00:11:57,000 Speaker 1: get it. That sounds high to us, but in the 238 00:11:57,040 --> 00:11:59,120 Speaker 1: context of a long history of the US, we've had 239 00:11:59,160 --> 00:12:02,040 Speaker 1: a lot of small business development at multiples of that. 240 00:12:02,200 --> 00:12:05,120 Speaker 1: So I'm actually not that worried about the treasury yields 241 00:12:05,160 --> 00:12:07,839 Speaker 1: being restrictive for barring too small business owners going back 242 00:12:07,840 --> 00:12:10,400 Speaker 1: to capital markets when we have a backup and yields. Obviously, 243 00:12:10,440 --> 00:12:12,200 Speaker 1: that could cause a sell off not just in the 244 00:12:12,200 --> 00:12:14,720 Speaker 1: bond market, but also the equity markets. So that's something 245 00:12:14,760 --> 00:12:17,440 Speaker 1: to watch as it relates to to capital markets. Thank 246 00:12:17,480 --> 00:12:19,760 Speaker 1: you very much for being with us. Katie Cotch is 247 00:12:19,800 --> 00:12:23,480 Speaker 1: the global head of Fundamental Equity client portfolio Management for 248 00:12:23,640 --> 00:12:26,319 Speaker 1: Goldman Sacks Asset Management, and I want to thank you 249 00:12:26,400 --> 00:12:41,800 Speaker 1: very much for being here. As you can hear in 250 00:12:41,800 --> 00:12:43,960 Speaker 1: the background, we are here with more than well, it 251 00:12:44,000 --> 00:12:47,120 Speaker 1: seems like ten thousand small businesses, and one of them 252 00:12:47,360 --> 00:12:50,400 Speaker 1: joins us now is Sarah Cows. She is the founder 253 00:12:50,440 --> 00:12:55,600 Speaker 1: and the chief executive of Swell that's s apostrophe uh 254 00:12:56,040 --> 00:12:59,280 Speaker 1: W E l L. And she's described herself as a 255 00:12:59,360 --> 00:13:04,160 Speaker 1: recovering countant, but now known for her double walled, copper 256 00:13:04,240 --> 00:13:07,320 Speaker 1: coated stainless steel vessels. Sarah, thanks very much for being 257 00:13:07,320 --> 00:13:09,360 Speaker 1: with us. Thanks for having me today. Tell us a 258 00:13:09,360 --> 00:13:12,240 Speaker 1: little bit about how you started this business. I believe 259 00:13:12,320 --> 00:13:16,000 Speaker 1: thirty thou dollars and an idea that you wanted to 260 00:13:16,120 --> 00:13:20,839 Speaker 1: change the way, well, the way people consume any kind 261 00:13:20,840 --> 00:13:22,800 Speaker 1: of liquid, any kind of beverage, you know. I had 262 00:13:22,800 --> 00:13:24,840 Speaker 1: the idea of myself as the customer and then the 263 00:13:24,840 --> 00:13:27,360 Speaker 1: market from there. I thought that the world needed less 264 00:13:27,360 --> 00:13:30,560 Speaker 1: single use plastic water bottles and something that looked better 265 00:13:30,600 --> 00:13:32,760 Speaker 1: and worked better to carry our drinks in. Now I 266 00:13:32,800 --> 00:13:34,839 Speaker 1: understand that this really came to you when you were 267 00:13:34,920 --> 00:13:38,199 Speaker 1: hiking in Arizona with your mother. That's correct. I was 268 00:13:38,280 --> 00:13:40,480 Speaker 1: drinking out of a water bottle that was single walls. 269 00:13:40,559 --> 00:13:43,320 Speaker 1: It was hot out. My water was hot instantly, and 270 00:13:43,360 --> 00:13:45,720 Speaker 1: I had this aha moment that if only I could 271 00:13:45,720 --> 00:13:48,040 Speaker 1: have cold water while I was hiking and something that 272 00:13:48,080 --> 00:13:50,920 Speaker 1: actually looked beautiful too, I could convert people to really 273 00:13:51,000 --> 00:13:54,280 Speaker 1: using my product. So, Sarah, we talked a lot about 274 00:13:54,320 --> 00:13:59,520 Speaker 1: the manufacturing process, where things are made, the whole supply change. 275 00:13:59,559 --> 00:14:01,640 Speaker 1: Can you talk us through that from your business and 276 00:14:01,679 --> 00:14:04,120 Speaker 1: what the challenges have been to scale up your business 277 00:14:04,160 --> 00:14:07,240 Speaker 1: as you do enter more than sixty different countries exactly. 278 00:14:07,240 --> 00:14:09,160 Speaker 1: I think that's one of the hardest things about scale. 279 00:14:09,200 --> 00:14:11,840 Speaker 1: You know, if I was making making software or service, 280 00:14:11,880 --> 00:14:14,560 Speaker 1: I might be able to have product a lot faster, um. 281 00:14:14,600 --> 00:14:17,800 Speaker 1: But but honestly, our product is made in Asia. UM. 282 00:14:17,840 --> 00:14:20,200 Speaker 1: The packaging has also made in Asia. It's put together there, 283 00:14:20,240 --> 00:14:22,360 Speaker 1: and it's it's shipped to the US or to the 284 00:14:22,400 --> 00:14:26,560 Speaker 1: point of distribution. And as you mentioned, sixty five different countries. UM, 285 00:14:26,640 --> 00:14:29,520 Speaker 1: we also have about two hundred different skews in stock 286 00:14:29,560 --> 00:14:31,880 Speaker 1: at any given time. So it really comes down to 287 00:14:31,920 --> 00:14:35,480 Speaker 1: having a very smart analytical planning team to understanding what 288 00:14:35,560 --> 00:14:37,240 Speaker 1: colors and sizes are going to be hot in what 289 00:14:37,320 --> 00:14:39,560 Speaker 1: markets at what time. And I just want to mention 290 00:14:39,560 --> 00:14:41,920 Speaker 1: that I believe you can spend anywhere from twenty five 291 00:14:41,960 --> 00:14:45,920 Speaker 1: dollars to even hundred dollars for one of your vessels, 292 00:14:45,920 --> 00:14:49,840 Speaker 1: one of your bottles, because if you like the Schowski crystals, 293 00:14:50,080 --> 00:14:52,720 Speaker 1: you could probably get one of Marcus. I believe that 294 00:14:52,840 --> 00:14:54,920 Speaker 1: is correct. That was a special edition that we did 295 00:14:54,920 --> 00:14:57,920 Speaker 1: where the proceeds went back to charity where mission driven companies. 296 00:14:58,040 --> 00:14:59,880 Speaker 1: We work with all different kinds of charities. But I 297 00:14:59,920 --> 00:15:02,040 Speaker 1: have to say I was surprised at how popular those 298 00:15:02,880 --> 00:15:05,680 Speaker 1: bottles were. Well, can I ask you just about how 299 00:15:05,760 --> 00:15:10,000 Speaker 1: quickly trends change and how much you do have to adjust? 300 00:15:10,360 --> 00:15:12,720 Speaker 1: I mean in water bottles, how how how much can 301 00:15:12,800 --> 00:15:16,280 Speaker 1: things change? That's a great question. You know our original colors, 302 00:15:16,280 --> 00:15:18,520 Speaker 1: so we bought some core colors, you know, our ocean blue, 303 00:15:18,520 --> 00:15:20,680 Speaker 1: which was the color I started with, the teak would 304 00:15:20,720 --> 00:15:23,400 Speaker 1: bottle that looks like would. Those are our course best 305 00:15:23,400 --> 00:15:25,240 Speaker 1: sellers and they really do make up the bulk of 306 00:15:25,240 --> 00:15:27,960 Speaker 1: our business. But what our customers love about us is 307 00:15:28,000 --> 00:15:32,840 Speaker 1: we're always innovating and Oftentimes our customers become collectors. They 308 00:15:32,880 --> 00:15:35,080 Speaker 1: buy the bigger one because they hold a bottle of wine, 309 00:15:35,240 --> 00:15:38,200 Speaker 1: or they buy the Lily Pulletzer collaboration because it matches 310 00:15:38,240 --> 00:15:41,680 Speaker 1: their handbag or maybe their sweater. Um. We have found 311 00:15:41,680 --> 00:15:44,160 Speaker 1: that customers have multiples at home, they take them to work, 312 00:15:44,200 --> 00:15:46,880 Speaker 1: the gym, to school, and because we're always coming out 313 00:15:46,920 --> 00:15:50,280 Speaker 1: with something that's on trend or something that our customers 314 00:15:50,320 --> 00:15:52,480 Speaker 1: really cove, it that we can have these collections that 315 00:15:52,520 --> 00:15:54,320 Speaker 1: come in and out all the time, even though those 316 00:15:54,360 --> 00:15:57,080 Speaker 1: core best sellers are really driving the business forward. Now 317 00:15:57,080 --> 00:15:59,800 Speaker 1: there's some estimates that you're doing at least if that 318 00:16:00,080 --> 00:16:03,000 Speaker 1: more than a hundred million dollars in sales a year. 319 00:16:03,120 --> 00:16:08,440 Speaker 1: Customers include Starbucks, Whole Foods, Jay Crew. But your first 320 00:16:08,440 --> 00:16:11,360 Speaker 1: customer was the Harvard Business School. That's correct. I was 321 00:16:11,360 --> 00:16:14,000 Speaker 1: an alumni and I really was hoping that I would 322 00:16:14,040 --> 00:16:16,560 Speaker 1: able to convince them to use my bottles and go 323 00:16:16,600 --> 00:16:19,720 Speaker 1: a little plastic free on campus. And they took up 324 00:16:19,760 --> 00:16:21,960 Speaker 1: your offer. Yes, and even to this day they buy 325 00:16:21,960 --> 00:16:25,760 Speaker 1: a bottle for every student. Now that's all great, but 326 00:16:25,840 --> 00:16:28,840 Speaker 1: there was an Oprah moment that really kind of change things. 327 00:16:28,880 --> 00:16:31,040 Speaker 1: Can you tell us about that sure so UM. In 328 00:16:31,080 --> 00:16:32,880 Speaker 1: the early days when I was the only employee, I 329 00:16:32,920 --> 00:16:35,200 Speaker 1: was also doing PR so I marched myself to the 330 00:16:35,240 --> 00:16:38,040 Speaker 1: post office with a bottle in a box and addressed 331 00:16:38,080 --> 00:16:40,880 Speaker 1: it to Oprah win Free, Chicago, Illinois. It made it 332 00:16:40,920 --> 00:16:43,480 Speaker 1: to her senior editor, who actually took the bottle on 333 00:16:43,640 --> 00:16:46,360 Speaker 1: her family vacation to Peru. She called me and said, 334 00:16:46,400 --> 00:16:48,760 Speaker 1: I love this thing. It really works. I want to 335 00:16:48,760 --> 00:16:51,200 Speaker 1: put it in a magazine. And really from there, I 336 00:16:51,200 --> 00:16:53,040 Speaker 1: think that was the day we turned from a project 337 00:16:53,040 --> 00:16:56,000 Speaker 1: into a business. So can you talk a little bit 338 00:16:56,040 --> 00:17:00,880 Speaker 1: about how you got the capital to start with the manufacturing. 339 00:17:00,880 --> 00:17:04,359 Speaker 1: Who were talking earlier about the challenges of credit for 340 00:17:04,640 --> 00:17:07,440 Speaker 1: small businesses, So how did you start with that? Well, 341 00:17:07,480 --> 00:17:10,000 Speaker 1: you know, Beim mentioned that I was recovering accountants, so 342 00:17:10,080 --> 00:17:12,200 Speaker 1: I really did care a lot in the early days 343 00:17:12,240 --> 00:17:15,800 Speaker 1: about immunity economics, and I used my personal savings, so 344 00:17:15,920 --> 00:17:18,480 Speaker 1: I was very careful, even though it's making a small 345 00:17:18,520 --> 00:17:21,119 Speaker 1: salary as an accountant, to always put money away, and 346 00:17:21,160 --> 00:17:23,480 Speaker 1: it was my nest egg. It was my my future 347 00:17:23,520 --> 00:17:25,840 Speaker 1: retirement savings that I was able to use to start 348 00:17:25,880 --> 00:17:29,240 Speaker 1: manufacturing UM. But my first run of of product was 349 00:17:29,280 --> 00:17:32,000 Speaker 1: only three thousand pieces. Um. I had a very small 350 00:17:32,040 --> 00:17:34,720 Speaker 1: apartment and that's where the inventory was kept under my 351 00:17:34,760 --> 00:17:38,320 Speaker 1: kitchen table um and really part of the reason, um, 352 00:17:38,400 --> 00:17:40,000 Speaker 1: you know, I didn't raise money in the beginning. I 353 00:17:40,040 --> 00:17:42,399 Speaker 1: was very careful about where the product was going to 354 00:17:42,480 --> 00:17:44,840 Speaker 1: be sold. Part of it was for brand, and part 355 00:17:44,840 --> 00:17:46,880 Speaker 1: of it was because I just didn't have very much 356 00:17:46,880 --> 00:17:49,119 Speaker 1: inventory because I couldn't afford to buy more until I 357 00:17:49,160 --> 00:17:52,560 Speaker 1: sold that first batch. When you open, you opened the boutique, 358 00:17:52,600 --> 00:17:55,920 Speaker 1: I believe in Palm Beach, I did what was behind 359 00:17:56,040 --> 00:17:59,720 Speaker 1: that because you've gone from that single boutique now I 360 00:17:59,760 --> 00:18:01,560 Speaker 1: know you just did a deal I believe with Married 361 00:18:01,640 --> 00:18:07,200 Speaker 1: International and their Elements hotel chain to put the bottles 362 00:18:07,240 --> 00:18:10,200 Speaker 1: in the hotel business. You know. In the early days, 363 00:18:10,240 --> 00:18:12,320 Speaker 1: I wanted to get as close to the customers as 364 00:18:12,320 --> 00:18:14,280 Speaker 1: I could, so having a small store, it was a 365 00:18:14,280 --> 00:18:16,199 Speaker 1: bit of a pop up store for six months, just 366 00:18:16,320 --> 00:18:18,520 Speaker 1: listening to customers. What do they think about the product, 367 00:18:18,560 --> 00:18:21,320 Speaker 1: what colors and finishes were they looking for. But to 368 00:18:21,440 --> 00:18:23,920 Speaker 1: really scale the business, I had to start thinking about 369 00:18:23,960 --> 00:18:27,520 Speaker 1: those big corporate partners and understanding are they looking for 370 00:18:27,600 --> 00:18:31,280 Speaker 1: sustainability In the case of Marriott and in their elements 371 00:18:31,280 --> 00:18:33,680 Speaker 1: brand or you know, are they really thinking about merchandise 372 00:18:33,720 --> 00:18:35,600 Speaker 1: in the case of what we're doing with Starbucks. So 373 00:18:35,880 --> 00:18:39,080 Speaker 1: it's it's great to have those small independent accounts. It's 374 00:18:39,119 --> 00:18:41,120 Speaker 1: really how we built the business. I'm still in about 375 00:18:41,119 --> 00:18:43,320 Speaker 1: two thousand small stores in the U S. And they 376 00:18:43,760 --> 00:18:45,760 Speaker 1: just like the small businesses here at the conference, they 377 00:18:45,800 --> 00:18:49,480 Speaker 1: really are the backbone of our business. But to really scale, 378 00:18:49,280 --> 00:18:52,280 Speaker 1: I wanted to go with some of those bigger brands, Sarah, 379 00:18:52,520 --> 00:18:55,720 Speaker 1: real quick, which country have you found to be the 380 00:18:55,720 --> 00:18:58,920 Speaker 1: most fertile ground outside of the US for your business 381 00:19:00,160 --> 00:19:02,679 Speaker 1: right now? It's Canada if you believe that, UM. But 382 00:19:02,840 --> 00:19:04,720 Speaker 1: some of the countries that we're starting to move into, 383 00:19:04,760 --> 00:19:07,840 Speaker 1: for example, we're just getting started in Japan. UM they're 384 00:19:07,840 --> 00:19:11,000 Speaker 1: super interested in design and they love the design that 385 00:19:11,200 --> 00:19:13,000 Speaker 1: UM that we have on the bottle. So if for me, 386 00:19:13,080 --> 00:19:15,280 Speaker 1: it's a bit of a surprise if if a country 387 00:19:15,359 --> 00:19:18,159 Speaker 1: is either looking for us for the sustainability angle, the 388 00:19:18,200 --> 00:19:21,080 Speaker 1: fashion angle, or even the design angle, everybody seems to 389 00:19:21,119 --> 00:19:23,760 Speaker 1: have something else that they sort of lean into UM. 390 00:19:23,800 --> 00:19:26,040 Speaker 1: And luckily with well we have so many different messages. 391 00:19:26,640 --> 00:19:28,480 Speaker 1: Sarah House, thank you so much for being with us. 392 00:19:28,480 --> 00:19:32,720 Speaker 1: Sarak House chief executive officer of swell s Apostrophe W 393 00:19:32,920 --> 00:19:36,320 Speaker 1: E l L. Talking about how she started that business 394 00:19:36,440 --> 00:19:53,000 Speaker 1: and grew it to where it is today. Talking about 395 00:19:53,119 --> 00:19:56,800 Speaker 1: financials and financial markets. Right now we are seeing uh, 396 00:19:56,920 --> 00:19:59,760 Speaker 1: some declines across the board in US equity markets. And 397 00:20:00,000 --> 00:20:03,000 Speaker 1: to understand uh, sort of how investors ought to be 398 00:20:03,080 --> 00:20:06,480 Speaker 1: thinking about this volatility and navigating it is Jack Avalin, 399 00:20:06,520 --> 00:20:10,720 Speaker 1: founding partner and chief investment officer at Crescent Wealth Advisers. Jack, 400 00:20:10,920 --> 00:20:13,560 Speaker 1: thank you so much for joining us. I'd love to 401 00:20:13,600 --> 00:20:15,600 Speaker 1: get your take on a on a key question today, 402 00:20:15,600 --> 00:20:19,480 Speaker 1: which is the economic backdrop looks good? Pretty much everybody 403 00:20:19,480 --> 00:20:22,360 Speaker 1: says that at least in the short term, Um, at 404 00:20:22,400 --> 00:20:26,160 Speaker 1: what point is this just evaluation story? And how long 405 00:20:26,240 --> 00:20:29,159 Speaker 1: if it is, can mis continue with stocks just overpriced 406 00:20:29,160 --> 00:20:32,840 Speaker 1: where they were and uh needing to reprice a bit 407 00:20:32,880 --> 00:20:37,200 Speaker 1: more before they seem fair. Yeah. Everything that I've seen 408 00:20:37,280 --> 00:20:41,080 Speaker 1: so far this year, at least related to this volatility 409 00:20:41,119 --> 00:20:46,439 Speaker 1: is pretty much technical evaluation related. I took comfort in 410 00:20:46,440 --> 00:20:51,040 Speaker 1: in seeing that, um, you know, credit conditions uh pretty 411 00:20:51,119 --> 00:20:56,960 Speaker 1: much remained intact throughout the entire downdraft. So that suggests 412 00:20:57,000 --> 00:20:59,880 Speaker 1: to me that you know, this isn't sickle, This isn't 413 00:20:59,880 --> 00:21:03,440 Speaker 1: anything at least related to the business cycle yet. Uh, 414 00:21:03,480 --> 00:21:06,320 Speaker 1: this is just simply a repricing as you as you 415 00:21:06,400 --> 00:21:10,280 Speaker 1: described Jack, there are You've written that there are three 416 00:21:10,520 --> 00:21:14,679 Speaker 1: types of reversals. Right, there's the technical, which you just 417 00:21:15,160 --> 00:21:18,480 Speaker 1: kind of alluded to, there's the cyclical, and then there's 418 00:21:18,520 --> 00:21:23,119 Speaker 1: the systemic. Right yeah, okay, so when do we know 419 00:21:23,280 --> 00:21:30,040 Speaker 1: which is which? Sure? So the the cyclical it relates 420 00:21:30,080 --> 00:21:33,040 Speaker 1: to the business cycle. For example, one of the things 421 00:21:33,080 --> 00:21:36,600 Speaker 1: I'm a little bit concerned about now is that we're 422 00:21:36,720 --> 00:21:43,199 Speaker 1: running our economy faster than our potential GDP growth. So 423 00:21:43,240 --> 00:21:47,399 Speaker 1: we're essentially beating a two percent race two percent donkey 424 00:21:47,440 --> 00:21:50,840 Speaker 1: into a three percent or so racehorse, and that we 425 00:21:50,880 --> 00:21:54,280 Speaker 1: can do for a while until we start running out 426 00:21:54,280 --> 00:21:57,760 Speaker 1: of capacity. One of the things I loved about this recovery, 427 00:21:57,760 --> 00:22:01,439 Speaker 1: while it was certainly slow, it is really steady, and 428 00:22:01,640 --> 00:22:06,040 Speaker 1: one that we were growing consistently at a potential GDP 429 00:22:06,160 --> 00:22:09,680 Speaker 1: which is about two. When when we start ramping higher 430 00:22:09,680 --> 00:22:13,200 Speaker 1: than that, then we could see excesses. And then then 431 00:22:13,320 --> 00:22:15,679 Speaker 1: what we'll see in a downturn would be things like 432 00:22:15,760 --> 00:22:19,560 Speaker 1: credit conditions tighten up, maybe as lenders decide that their 433 00:22:20,160 --> 00:22:23,840 Speaker 1: borrowers are less likely to repay their loans. We may 434 00:22:23,880 --> 00:22:27,000 Speaker 1: see a yield curve in version. We could see some 435 00:22:27,160 --> 00:22:31,000 Speaker 1: inflation as we run out of capacity for either production 436 00:22:31,160 --> 00:22:34,119 Speaker 1: for labor. We're already starting to see a little of 437 00:22:34,160 --> 00:22:37,000 Speaker 1: that in trucking. UH. And so those are the clues 438 00:22:37,040 --> 00:22:38,679 Speaker 1: that we would be looking for to say, you know what, 439 00:22:38,800 --> 00:22:42,399 Speaker 1: this is now a circle called downturn, one that typically 440 00:22:43,200 --> 00:22:47,320 Speaker 1: lasts a few years, not just a couple of days. So, Jack, 441 00:22:47,600 --> 00:22:49,040 Speaker 1: one thing that a lot of people have been saying 442 00:22:49,160 --> 00:22:52,320 Speaker 1: has driven the sell off and equities has been the 443 00:22:52,440 --> 00:22:57,880 Speaker 1: increase in benchmark US treasury yields. UH. Goldman's Access Management 444 00:22:57,920 --> 00:23:01,399 Speaker 1: came out overnight was talking about out seeing that yield 445 00:23:01,480 --> 00:23:03,640 Speaker 1: go to three and a half percent within the next 446 00:23:03,680 --> 00:23:07,439 Speaker 1: six months. Do you agree, Yeah, Unfortunately, I don't know. 447 00:23:07,560 --> 00:23:10,160 Speaker 1: I don't know about timing, but I do agree. I mean, 448 00:23:10,200 --> 00:23:13,200 Speaker 1: if you think about stocks and bonds, they're just generally 449 00:23:13,240 --> 00:23:16,760 Speaker 1: competing for capital um. If you you know you want 450 00:23:16,840 --> 00:23:21,480 Speaker 1: steady income with low risk, you want typically gravitate the bogs. 451 00:23:21,520 --> 00:23:25,440 Speaker 1: If you want higher return expectations with a little more risk, 452 00:23:25,560 --> 00:23:28,119 Speaker 1: then you'd go to equities. And since two thousand nine, 453 00:23:28,720 --> 00:23:31,879 Speaker 1: UM bods have been tugging, you know, tugging at this 454 00:23:31,920 --> 00:23:34,679 Speaker 1: tug of war against equities with one arm time behind 455 00:23:35,040 --> 00:23:40,160 Speaker 1: it's back, because yields were just held artificially. ROW. One 456 00:23:40,160 --> 00:23:43,679 Speaker 1: of the ways I look at that is historically the 457 00:23:43,760 --> 00:23:48,119 Speaker 1: tenure treasury yield tends to track nominal GDP. Nominal GDP 458 00:23:48,240 --> 00:23:51,360 Speaker 1: right now is four percent tenure treasury two point eight, 459 00:23:51,680 --> 00:23:55,800 Speaker 1: So there is some more room UH for UM yields 460 00:23:55,800 --> 00:23:59,399 Speaker 1: to rise. And as a result of that, equities have 461 00:23:59,440 --> 00:24:02,160 Speaker 1: been winning a tug of war and has and has 462 00:24:02,560 --> 00:24:07,000 Speaker 1: have commanded a premium that they would normally not enjoy 463 00:24:07,280 --> 00:24:10,800 Speaker 1: if fields were higher. Jack, you got any how much 464 00:24:10,800 --> 00:24:14,680 Speaker 1: cash do you have on hand for your for your investors. UM. 465 00:24:14,840 --> 00:24:18,440 Speaker 1: We have not raised cash during this UH downturn, largely 466 00:24:18,480 --> 00:24:20,960 Speaker 1: because again we are looked at it as more of 467 00:24:21,440 --> 00:24:25,120 Speaker 1: a technical bump than anything more serious than that. So 468 00:24:25,480 --> 00:24:29,000 Speaker 1: we were pretty fully invested going into two thousand and eighteen. 469 00:24:29,040 --> 00:24:32,120 Speaker 1: PIM and like I said, didn't use this as an 470 00:24:32,119 --> 00:24:35,480 Speaker 1: excuse to maybe get some sideline cash in, but not 471 00:24:35,600 --> 00:24:37,760 Speaker 1: an excuse to get out of the market. So are 472 00:24:37,800 --> 00:24:42,400 Speaker 1: you actually buying now? Yeah? When if we have opportunity 473 00:24:42,440 --> 00:24:45,720 Speaker 1: to buy. We will. Uh. It's in other words, you 474 00:24:45,760 --> 00:24:49,680 Speaker 1: don't see it having come already. No, I think that, 475 00:24:49,760 --> 00:24:52,760 Speaker 1: you know, I will use these down drafts as buying 476 00:24:52,800 --> 00:24:56,639 Speaker 1: opportunities because, like I said, I'm not seeing much follow 477 00:24:56,680 --> 00:24:59,639 Speaker 1: through to any other markets yet. UM. And if you 478 00:24:59,720 --> 00:25:04,280 Speaker 1: now strip away UM valuations and look at them, look 479 00:25:04,280 --> 00:25:08,119 Speaker 1: at the market relative to UM, the earnings and yield 480 00:25:08,440 --> 00:25:13,119 Speaker 1: I'm sorry, earnings and dividends markets about five percent over valued. 481 00:25:13,160 --> 00:25:16,840 Speaker 1: I mean to me that statistical noise, We're actually back 482 00:25:16,880 --> 00:25:19,760 Speaker 1: to fair value, whereas we started the first couple of 483 00:25:19,840 --> 00:25:24,480 Speaker 1: days of the year between fifteen and over valued. Jack, 484 00:25:24,520 --> 00:25:27,399 Speaker 1: what kind of stocks would get you interested in buying? Uh, 485 00:25:27,600 --> 00:25:32,000 Speaker 1: like Apple or Facebook or what kind of stocks? Yeah? 486 00:25:32,040 --> 00:25:34,919 Speaker 1: I think that. UM. You know, I'm not a stock picker, 487 00:25:34,960 --> 00:25:37,439 Speaker 1: but I would say that, you know, if you're looking 488 00:25:37,440 --> 00:25:41,840 Speaker 1: to trade, certainly that's where the action is on the 489 00:25:42,000 --> 00:25:45,360 Speaker 1: on the downside and of course on the upside. UM. 490 00:25:45,440 --> 00:25:49,000 Speaker 1: So as a long term investment, I would say, as 491 00:25:49,640 --> 00:25:54,880 Speaker 1: economic growth tends to broaden out, UH, these large cap 492 00:25:54,920 --> 00:25:58,600 Speaker 1: growth companies will kind of fall behind some of the 493 00:25:58,680 --> 00:26:03,720 Speaker 1: more broader names like financials UH and industrials and basic 494 00:26:03,840 --> 00:26:07,160 Speaker 1: materials UM. So from a sector basis, I would say 495 00:26:07,560 --> 00:26:11,080 Speaker 1: that probably plays pretty well over the next four to 496 00:26:11,240 --> 00:26:14,560 Speaker 1: six quarters, but over you know, as as a trade 497 00:26:14,600 --> 00:26:18,000 Speaker 1: as a hunch. Uh, These large cap growth names like 498 00:26:18,080 --> 00:26:21,000 Speaker 1: the you know, Amazon, Facebook, Apple, and so forth, there 499 00:26:21,400 --> 00:26:25,760 Speaker 1: are interesting plays. All Right, I'm going to leave it there, 500 00:26:25,760 --> 00:26:27,399 Speaker 1: but I want to thank you very much for joining us. 501 00:26:27,480 --> 00:26:30,240 Speaker 1: Jack Ablin is the founding partner and the chief investment 502 00:26:30,280 --> 00:26:37,560 Speaker 1: officer at Crescent Wealth Advisors. Thanks for listening to the 503 00:26:37,600 --> 00:26:40,680 Speaker 1: Bloomberg P and L podcast. You can subscribe and listen 504 00:26:40,720 --> 00:26:44,880 Speaker 1: to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform 505 00:26:44,920 --> 00:26:48,840 Speaker 1: you prefer. I'm pim Fox. I'm on Twitter at pim Fox. 506 00:26:49,160 --> 00:26:52,680 Speaker 1: I'm on Twitter at Lisa Abramo wits one. Before the podcast, 507 00:26:52,720 --> 00:27:03,000 Speaker 1: you can always catch us worldwide on Bloomberg Radio.