WEBVTT - Banks Are Still Reducing Energy Exposure: BlackGold’s Honari 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg pm L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.360 podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. We 0:00:32.440 --> 0:00:37.560 are seeing UH oil prices slump, the worst route UH 0:00:37.640 --> 0:00:40.599 in two years. Here to speak with us about what 0:00:40.640 --> 0:00:43.479 we can expect going forward and how investors are kind 0:00:43.479 --> 0:00:46.760 of positioning around this from a credit perspective. Sharam Honari, 0:00:46.880 --> 0:00:50.360 she's he's partner of black Gold Capital Management, which overseas 0:00:50.520 --> 0:00:53.800 one point to billion dollars from Houston, Texas. But he 0:00:53.880 --> 0:00:56.640 joins us from our eleven three oh studios in New York. Sharon, 0:00:56.720 --> 0:00:59.040 thank you so much for joining us. I want to 0:00:59.080 --> 0:01:03.400 get your perspective, if from you know, a credit investor standpoint, 0:01:03.800 --> 0:01:08.440 as you see oil prices dip lower, what's our biggest concern? Well, 0:01:08.440 --> 0:01:10.840 I think from our perspective, you know, we've actually had 0:01:10.840 --> 0:01:13.960 a viewpoint that the commodity would be range bound forty 0:01:14.000 --> 0:01:16.440 to sixty dollars. UH. You know, we invest up and 0:01:16.440 --> 0:01:19.080 down the capital structure of energy companies, and and from 0:01:19.120 --> 0:01:22.600 that perspective, the you know, the daily swings in oil 0:01:22.640 --> 0:01:25.399 prices don't really impact our credits as much as they 0:01:25.400 --> 0:01:27.840 probably did when oil went from a hundred ten uh, 0:01:27.840 --> 0:01:30.720 you know, just twenty six dollars a barrel. As we've seen, 0:01:31.080 --> 0:01:33.880 you know, after kind of this history doric dislocation in 0:01:33.920 --> 0:01:36.520 the in the credit markets, we've obviously seen uh, you know, 0:01:36.600 --> 0:01:39.280 rebound and in crude prices about fifty nine dollars a barrel. 0:01:39.360 --> 0:01:42.080 Companies have really been focusing on their balance sheets. They've 0:01:42.080 --> 0:01:46.200 been cutting distributions, selling assets, increasing their efficiencies. Really those 0:01:46.240 --> 0:01:50.120 are all credit positive type of actions. So from our perspective, 0:01:50.240 --> 0:01:52.680 if you look at the market today, it's obviously very 0:01:52.760 --> 0:01:55.880 challenging for energy equities in particular. Energy equities were down 0:01:55.920 --> 0:01:58.440 last year, they're down this year again. Uh. There continues 0:01:58.480 --> 0:02:00.560 to obviously be a lot of stress, uh in the 0:02:00.680 --> 0:02:04.040 energy arena, But investors at this point of really demanding 0:02:04.280 --> 0:02:07.160 you know, return on invested capital, and it's really forcing 0:02:07.160 --> 0:02:09.079 companies again to improve their balance sheets. And I think 0:02:09.080 --> 0:02:12.359 that's really a positive for credit. What is the collateral 0:02:12.440 --> 0:02:15.840 to most of this energy credit. Well, I think it 0:02:15.840 --> 0:02:18.400 depends on obviously the the type of company. But if 0:02:18.400 --> 0:02:20.440 you're you're looking at you know e, m p S, 0:02:20.480 --> 0:02:23.360 obviously it's the the assets of PDP value and oil 0:02:23.360 --> 0:02:26.360 field services a different type of dynamic. Uh. And obviously 0:02:26.360 --> 0:02:28.280 the midstream we really like the midstream space that a 0:02:28.320 --> 0:02:30.280 lot of the infrastructure that's in the ground, we really 0:02:30.280 --> 0:02:33.640 think that can't re replaced. So you're talking about the 0:02:33.720 --> 0:02:39.440 actual refineries and the pipelines or or or the assets 0:02:39.440 --> 0:02:41.560 you set assets in the ground. So is that the 0:02:41.680 --> 0:02:43.680 natural gas and the oil in the ground. Just trying 0:02:43.680 --> 0:02:46.160 to understand. Yeah, it depends on again what subsector. If 0:02:46.160 --> 0:02:48.400 you're looking at the midstream space, we're talking about process 0:02:48.440 --> 0:02:51.000 and gathering. If you're looking to exploration companies, that's really 0:02:51.000 --> 0:02:53.560 the oil and gas in the ground. So sure you 0:02:53.600 --> 0:02:56.800 were saying, uh in a note of that you put 0:02:56.840 --> 0:02:59.639 out earlier, that you think that there is an opportunity 0:02:59.680 --> 0:03:04.839 and offering financing to high yield companies, specutive great companies. Uh, 0:03:04.880 --> 0:03:07.920 that's within them one hundred to three hundred million dollar range. 0:03:07.960 --> 0:03:09.799 Can you talk a little bit about that. Yeah, I 0:03:09.840 --> 0:03:12.280 think that's really a part of the dynamic that's really 0:03:12.600 --> 0:03:14.240 changed over the last couple of years. Again, if you 0:03:14.280 --> 0:03:17.800 look at the energy space from two thousand fourteen on, obviously, 0:03:17.840 --> 0:03:20.280 you know we had two plus bankruptcies in the space. 0:03:20.280 --> 0:03:23.000 There was really a survivorship bias. Again, companies focused on 0:03:23.040 --> 0:03:24.919 their balance sheets, but a lot of banks had a 0:03:24.919 --> 0:03:27.400 tremendous amount of exposure to the energy space, and the 0:03:27.440 --> 0:03:30.200 Office of the Controller has basically forced a lot of 0:03:30.200 --> 0:03:32.960 the banks to continue to decrease their exposure. So if, 0:03:33.000 --> 0:03:34.960 for example, you look at the e MP space right now, 0:03:35.080 --> 0:03:38.280 companies there are three times plus levered. Banks really can't 0:03:38.520 --> 0:03:41.240 lend to those type of entities. And for folks like us, 0:03:41.520 --> 0:03:43.160 there's an aspect of the market where I would say 0:03:43.200 --> 0:03:46.080 hundred to three hundred million dollar type of range. There 0:03:46.080 --> 0:03:49.200 really is a scarcity of capital for those type of companies, 0:03:49.200 --> 0:03:51.440 and we're trying to fill that void. Then the beauty 0:03:51.520 --> 0:03:53.800 I think of of that smaller kind of subsid is 0:03:53.840 --> 0:03:55.920 you know, you go three hundred million above that's where 0:03:55.920 --> 0:03:57.880 people have access to the high yield markets or leverage 0:03:57.920 --> 0:03:59.960 loan market, but below that that's not really the case. 0:04:00.240 --> 0:04:03.400 Are you doing that with direct lending or with bespoke 0:04:03.440 --> 0:04:06.680 bond offerings or yeah, for us, I'll give you an example. 0:04:06.680 --> 0:04:09.320 I mean, we actually just did a direct lending deal 0:04:09.400 --> 0:04:12.240 to a company called Atlas Sands and the Permian. It's 0:04:12.240 --> 0:04:15.280 actually a company that was started by a Bud Brigham 0:04:15.280 --> 0:04:17.680 who's very well known in the energy space. They put 0:04:17.680 --> 0:04:20.000 in about two hundred million dollars worth of equally, we 0:04:20.080 --> 0:04:22.360 provided them with a hundred fifty million dollar first lane 0:04:22.680 --> 0:04:24.919 and really the success there on our part was, you know, 0:04:24.960 --> 0:04:27.159 we've we're based in Houston, we've known but in his 0:04:27.200 --> 0:04:30.359 team for ten fifteen plus years. Uh, they decided to 0:04:30.400 --> 0:04:32.239 do the deal with us rather than with other folks. 0:04:32.839 --> 0:04:35.000 So can you tell us what is the interest rate 0:04:35.000 --> 0:04:37.760 on a hundred and fifty million that you loaned that 0:04:37.800 --> 0:04:40.240 particular thing? I cannot actually share that with you. That's 0:04:40.279 --> 0:04:42.440 kind of a private transaction, but it will give us 0:04:42.440 --> 0:04:45.120 an idea then of what would be the cost to 0:04:45.480 --> 0:04:48.200 that kind of borrower and what kind of duration are 0:04:48.240 --> 0:04:50.160 we talking about? Yeah, I think for we're looking at 0:04:50.200 --> 0:04:53.200 kind of double digit type of returns. That's actually actually 0:04:53.200 --> 0:04:57.719 a five year loan for this particular transaction. So firstly, 0:04:57.760 --> 0:04:59.479 in a piece of paper, I thought it was really 0:04:59.520 --> 0:05:01.600 interesting that you're saying that regulators are still correcting down 0:05:01.640 --> 0:05:04.040 on banks and having them reduce their exposure to energy. 0:05:04.600 --> 0:05:07.680 Uh is that continuing today or that was just throughout 0:05:07.760 --> 0:05:10.160 last year. No, it's actually continuing today. I mean our 0:05:10.200 --> 0:05:12.880 offices in Houston, we have bankers coming through all all 0:05:12.920 --> 0:05:16.000 the time. You know, they're looking to partner with us 0:05:16.160 --> 0:05:18.359 to basically liquidate some of the assets that they just 0:05:18.400 --> 0:05:21.960 can't hold on their books. At what price level does 0:05:22.000 --> 0:05:26.599 it become a real problem to maintain these credits or 0:05:26.680 --> 0:05:30.040 to lend even more money to the industry. Well, I 0:05:30.040 --> 0:05:31.720 think you looked at one of one of the aspects 0:05:31.720 --> 0:05:34.200 I think that's really been changing in this industry overall 0:05:34.279 --> 0:05:36.080 is if you look at, for example, energy equities, they've 0:05:36.080 --> 0:05:38.880 been underperforming for a decade. I think a lot of 0:05:38.920 --> 0:05:42.320 investors are also taking a step back. You're seeing it also, 0:05:42.400 --> 0:05:45.280 you know New York State Pension here, the suing Exxon 0:05:45.520 --> 0:05:47.600 and the like, and they're actually divesting their assets. So 0:05:47.640 --> 0:05:50.440 I think that's part of the aspect of scarcity of 0:05:50.560 --> 0:05:53.960 capital going forward. Where there's a need, there continues to 0:05:54.000 --> 0:05:55.880 be a need. Banker stepping back. Obviously, there's a lot 0:05:55.880 --> 0:05:58.280 of private equity firms folks like US that are trying 0:05:58.320 --> 0:06:00.960 to ultimately fill that void in the market place. Thanks 0:06:01.040 --> 0:06:04.680 very much, Sharram Jnari. He's the partner of black Gold 0:06:04.800 --> 0:06:21.640 Capital Management, talking about credit and the energy markets. We 0:06:21.720 --> 0:06:25.239 are broadcasting live from the Golden Sacks ten thousand Small 0:06:25.320 --> 0:06:28.160 Business Summit at the Washington Hilton in Washington, d C. 0:06:28.839 --> 0:06:31.960 It is brought to you by Sage Business Cloud Financials, 0:06:32.000 --> 0:06:35.440 a powerful cloud accounting solution built on the Salesforce platform 0:06:35.520 --> 0:06:39.400 to empower businesses to scale without complexity. More at Sage 0:06:39.440 --> 0:06:44.120 dot com slash Financials. Uh So, I'm we're very lucky 0:06:44.160 --> 0:06:46.440 to have Katie Coach here with us. She's Global head 0:06:46.440 --> 0:06:50.960 of Fundamental Equity Client Portfolio Management at Goldman Sachs Asset Management. 0:06:50.960 --> 0:06:53.240 And Katie, before we sort of dig into what's been 0:06:53.240 --> 0:06:56.680 going on in the markets, why are you here? Um? So, 0:06:56.760 --> 0:06:58.719 First of all, thank you so much for having me 0:06:58.760 --> 0:07:00.680 on the program. Um We are here. This is the 0:07:00.760 --> 0:07:04.760 largest gathering ever in the US for small businesses. Um 0:07:04.839 --> 0:07:07.039 And we're here because at Goldman Sacks we think that 0:07:07.120 --> 0:07:11.080 it is incredibly important to support small businesses as a 0:07:11.120 --> 0:07:14.280 way to increase the overall economic health of the economy. 0:07:14.440 --> 0:07:16.760 It's a program that we've had for eight years, We've 0:07:16.800 --> 0:07:20.680 reached sixty d businesses. We're bringing those business owners and 0:07:20.840 --> 0:07:24.640 entrepreneurs education, um, and we're also giving them connections and 0:07:24.680 --> 0:07:28.280 access to capital. So Katie, I guess, um, it would 0:07:28.280 --> 0:07:31.280 be good to connect this to what we're seeing in markets. 0:07:31.320 --> 0:07:35.200 We're seeing a lot more volatility. We're seeing the specter 0:07:35.520 --> 0:07:37.760 for rising interest rates, with even so much gold in 0:07:37.760 --> 0:07:40.680 success Management predicting that UH tenure treasure YELD could go 0:07:40.720 --> 0:07:43.679 up to three point five percent in the next six months. 0:07:44.240 --> 0:07:48.480 When does this bleed into consume business small business confidence? 0:07:48.480 --> 0:07:51.120 What does this bleed into the real economy? Right? So, Um, 0:07:51.160 --> 0:07:54.960 I think we we should really separate what's happening in markets, 0:07:55.000 --> 0:07:58.120 which is about volatility. Um I would argue that actually 0:07:58.160 --> 0:08:01.400 volatility needed to normalize. No one promised that was going 0:08:01.400 --> 0:08:03.920 to be an orderly process that rarely rarely is, but 0:08:04.200 --> 0:08:06.200 it is good to get to more normal levels of 0:08:06.280 --> 0:08:09.800 volatility in markets. UM. And what I would say is 0:08:09.800 --> 0:08:12.120 that you need to separate that from what you referred 0:08:12.160 --> 0:08:15.000 to as the real economy. When we look at the markets, 0:08:15.000 --> 0:08:17.000 they're volatile, yes, but it needs to normalize. When we 0:08:17.000 --> 0:08:19.040 look at the real economy, it actually continues to be 0:08:19.080 --> 0:08:21.760 incredibly healthy. Um. And when I'm out there talking to 0:08:21.800 --> 0:08:25.200 these small business owners, they feel incredibly optimistic about the 0:08:25.200 --> 0:08:28.200 opportunities set in front of them. And that is anecdotal 0:08:28.240 --> 0:08:30.840 to these business owners. But actually the n f IB, 0:08:31.080 --> 0:08:33.920 the National Federation for Independent Businesses, came out with some 0:08:34.000 --> 0:08:37.240 data overnight where they're looking at a very broad population 0:08:37.320 --> 0:08:40.200 of small business owners and asking them the question, what 0:08:40.360 --> 0:08:42.079 you know, what is your level of optimism and is 0:08:42.120 --> 0:08:44.200 this a good time to expand businesses? And what what 0:08:44.280 --> 0:08:46.760 you see in that survey data is that we're at 0:08:46.800 --> 0:08:49.920 record high levels. Uh So Main Street is actually roaring 0:08:49.960 --> 0:08:52.320 in the US. That's extremely good news for the economy. 0:08:52.360 --> 0:08:54.760 It doesn't mean it's going to translate into perfect equity markets. 0:08:54.800 --> 0:08:56.800 There's gonna be ups and downs, as we've seen. But 0:08:56.840 --> 0:08:59.520 if you actually feel pretty good about the underlying economic 0:08:59.559 --> 0:09:02.400 trajectory here over time, that should be good for risk 0:09:02.440 --> 0:09:06.040 assets as well, Katie. Earlier today I got the chance 0:09:06.080 --> 0:09:08.960 to speak with one of the attendees here. UM. The 0:09:08.960 --> 0:09:13.360 Debka sen is the owner and operator of a classic 0:09:13.559 --> 0:09:17.640 tours collection. They're based in Redonda Beach, California, and she 0:09:17.760 --> 0:09:19.680 told me that one of the things that she has 0:09:19.840 --> 0:09:24.280 learned from these Goldman Sachs events is not just how 0:09:24.320 --> 0:09:28.280 to operate her business in her industry, but how to 0:09:28.360 --> 0:09:32.200 operate her business in her community and how she had 0:09:32.280 --> 0:09:36.320 not necessarily understood that role. And I'm wondering if you 0:09:36.360 --> 0:09:40.320 could just maybe twin that with something that Goldman Sachs 0:09:40.440 --> 0:09:45.080 is doing with the online lender Marcus, because one of 0:09:45.080 --> 0:09:47.720 the points that she made is not everything is a 0:09:47.760 --> 0:09:52.080 sales call, and that it is sometimes difficult to remember 0:09:52.080 --> 0:09:55.560 that as a small business, the sales cycle can be 0:09:55.760 --> 0:09:57.920 long and you don't know where that next sale is 0:09:57.960 --> 0:10:01.360 going to come from, right so income when we work 0:10:01.400 --> 0:10:04.280 with these businesses, it's great that she has the learned 0:10:04.280 --> 0:10:06.400 that from the ten thousand Small Business program, that she 0:10:06.440 --> 0:10:08.400 has to be a successful business but also has to 0:10:08.400 --> 0:10:11.160 be thoughtful about um how she interacts and works with 0:10:11.200 --> 0:10:13.240 the community. And I would say that that is on 0:10:13.320 --> 0:10:15.439 two levels. The first is, of course, many of these 0:10:15.480 --> 0:10:18.240 businesses are sourcing from the community for their talent, and 0:10:18.280 --> 0:10:20.880 so they're hiring locally. And one of when we look 0:10:20.880 --> 0:10:23.280 at the challenges that these small business owners point to, 0:10:23.360 --> 0:10:25.520 there's really three main ones and and and the first 0:10:25.559 --> 0:10:28.600 amongst those is attracting and retaining employees, which they're usually 0:10:28.600 --> 0:10:31.120 sourcing from the community. And so one of the solutions 0:10:31.120 --> 0:10:33.400 that we're putting forward in this program is to help 0:10:33.440 --> 0:10:35.320 people we train them on how to to find the 0:10:35.360 --> 0:10:37.920 right talent locally. But then we also think the government 0:10:37.960 --> 0:10:40.640 should step in and help give, for example, tax credits 0:10:41.120 --> 0:10:43.680 for people in terms of training employees, because when we 0:10:43.720 --> 0:10:46.600 invest in employees, were ultimately investing in the economy. So 0:10:46.640 --> 0:10:49.160 that's one thing about interacting with the community locally is 0:10:49.160 --> 0:10:51.959 about hiring. The second thing, which you pointed to, is 0:10:52.000 --> 0:10:54.560 about access to credit and capital, which continues to be 0:10:54.600 --> 0:10:57.640 a major challenge um for these small business owners. And 0:10:57.679 --> 0:11:00.320 the regulation that we've had since the financial crisis means 0:11:00.320 --> 0:11:03.080 that it's actually been more challenging for these small business 0:11:03.080 --> 0:11:06.280 owners to tap credit and capital um because they're often 0:11:06.320 --> 0:11:08.360 actually having to do that off of a personal balance 0:11:08.400 --> 0:11:12.160 sheet and that's become much more restrict credit card yes exactly. 0:11:12.200 --> 0:11:14.480 So really when you talk to these business owners, their 0:11:14.480 --> 0:11:17.200 credit cards have been their working capital, right and so 0:11:17.240 --> 0:11:19.560 the rates are high and also we've had less access 0:11:19.600 --> 0:11:21.240 to credit coming out of the crisis, and that's been 0:11:21.280 --> 0:11:23.920 a real challenge for people in scaling their businesses and 0:11:23.960 --> 0:11:26.079 so connecting it to to what we're trying to do here. 0:11:26.080 --> 0:11:28.640 We work with a lot of local organizations, UM and 0:11:28.720 --> 0:11:32.040 helping those organizations extend and make loans to small businesses 0:11:32.520 --> 0:11:34.559 because it is about retaining people. And then the other 0:11:35.160 --> 0:11:37.520 challenge which you brought up is also about access to 0:11:37.559 --> 0:11:39.400 credit to keep the business going and be able to 0:11:39.440 --> 0:11:42.800 scale it. So just really quickly, at what point will 0:11:42.920 --> 0:11:46.160 treasure yields rise enough that it will become restrictive for 0:11:46.360 --> 0:11:49.839 small businesses to borrow? Yeah, so, UM, listen, we're I 0:11:49.880 --> 0:11:52.480 think it's important to recognize we're coming off of incredibly 0:11:52.559 --> 0:11:54.880 low rates here, so three and a half percent, I 0:11:55.240 --> 0:11:57.000 get it. That sounds high to us, but in the 0:11:57.040 --> 0:11:59.120 context of a long history of the US, we've had 0:11:59.160 --> 0:12:02.040 a lot of small business development at multiples of that. 0:12:02.200 --> 0:12:05.120 So I'm actually not that worried about the treasury yields 0:12:05.160 --> 0:12:07.839 being restrictive for barring too small business owners going back 0:12:07.840 --> 0:12:10.400 to capital markets when we have a backup and yields. Obviously, 0:12:10.440 --> 0:12:12.200 that could cause a sell off not just in the 0:12:12.200 --> 0:12:14.720 bond market, but also the equity markets. So that's something 0:12:14.760 --> 0:12:17.440 to watch as it relates to to capital markets. Thank 0:12:17.480 --> 0:12:19.760 you very much for being with us. Katie Cotch is 0:12:19.800 --> 0:12:23.480 the global head of Fundamental Equity client portfolio Management for 0:12:23.640 --> 0:12:26.319 Goldman Sacks Asset Management, and I want to thank you 0:12:26.400 --> 0:12:41.800 very much for being here. As you can hear in 0:12:41.800 --> 0:12:43.960 the background, we are here with more than well, it 0:12:44.000 --> 0:12:47.120 seems like ten thousand small businesses, and one of them 0:12:47.360 --> 0:12:50.400 joins us now is Sarah Cows. She is the founder 0:12:50.440 --> 0:12:55.600 and the chief executive of Swell that's s apostrophe uh 0:12:56.040 --> 0:12:59.280 W E l L. And she's described herself as a 0:12:59.360 --> 0:13:04.160 recovering countant, but now known for her double walled, copper 0:13:04.240 --> 0:13:07.320 coated stainless steel vessels. Sarah, thanks very much for being 0:13:07.320 --> 0:13:09.360 with us. Thanks for having me today. Tell us a 0:13:09.360 --> 0:13:12.240 little bit about how you started this business. I believe 0:13:12.320 --> 0:13:16.000 thirty thou dollars and an idea that you wanted to 0:13:16.120 --> 0:13:20.839 change the way, well, the way people consume any kind 0:13:20.840 --> 0:13:22.800 of liquid, any kind of beverage, you know. I had 0:13:22.800 --> 0:13:24.840 the idea of myself as the customer and then the 0:13:24.840 --> 0:13:27.360 market from there. I thought that the world needed less 0:13:27.360 --> 0:13:30.560 single use plastic water bottles and something that looked better 0:13:30.600 --> 0:13:32.760 and worked better to carry our drinks in. Now I 0:13:32.800 --> 0:13:34.839 understand that this really came to you when you were 0:13:34.920 --> 0:13:38.199 hiking in Arizona with your mother. That's correct. I was 0:13:38.280 --> 0:13:40.480 drinking out of a water bottle that was single walls. 0:13:40.559 --> 0:13:43.320 It was hot out. My water was hot instantly, and 0:13:43.360 --> 0:13:45.720 I had this aha moment that if only I could 0:13:45.720 --> 0:13:48.040 have cold water while I was hiking and something that 0:13:48.080 --> 0:13:50.920 actually looked beautiful too, I could convert people to really 0:13:51.000 --> 0:13:54.280 using my product. So, Sarah, we talked a lot about 0:13:54.320 --> 0:13:59.520 the manufacturing process, where things are made, the whole supply change. 0:13:59.559 --> 0:14:01.640 Can you talk us through that from your business and 0:14:01.679 --> 0:14:04.120 what the challenges have been to scale up your business 0:14:04.160 --> 0:14:07.240 as you do enter more than sixty different countries exactly. 0:14:07.240 --> 0:14:09.160 I think that's one of the hardest things about scale. 0:14:09.200 --> 0:14:11.840 You know, if I was making making software or service, 0:14:11.880 --> 0:14:14.560 I might be able to have product a lot faster, um. 0:14:14.600 --> 0:14:17.800 But but honestly, our product is made in Asia. UM. 0:14:17.840 --> 0:14:20.200 The packaging has also made in Asia. It's put together there, 0:14:20.240 --> 0:14:22.360 and it's it's shipped to the US or to the 0:14:22.400 --> 0:14:26.560 point of distribution. And as you mentioned, sixty five different countries. UM, 0:14:26.640 --> 0:14:29.520 we also have about two hundred different skews in stock 0:14:29.560 --> 0:14:31.880 at any given time. So it really comes down to 0:14:31.920 --> 0:14:35.480 having a very smart analytical planning team to understanding what 0:14:35.560 --> 0:14:37.240 colors and sizes are going to be hot in what 0:14:37.320 --> 0:14:39.560 markets at what time. And I just want to mention 0:14:39.560 --> 0:14:41.920 that I believe you can spend anywhere from twenty five 0:14:41.960 --> 0:14:45.920 dollars to even hundred dollars for one of your vessels, 0:14:45.920 --> 0:14:49.840 one of your bottles, because if you like the Schowski crystals, 0:14:50.080 --> 0:14:52.720 you could probably get one of Marcus. I believe that 0:14:52.840 --> 0:14:54.920 is correct. That was a special edition that we did 0:14:54.920 --> 0:14:57.920 where the proceeds went back to charity where mission driven companies. 0:14:58.040 --> 0:14:59.880 We work with all different kinds of charities. But I 0:14:59.920 --> 0:15:02.040 have to say I was surprised at how popular those 0:15:02.880 --> 0:15:05.680 bottles were. Well, can I ask you just about how 0:15:05.760 --> 0:15:10.000 quickly trends change and how much you do have to adjust? 0:15:10.360 --> 0:15:12.720 I mean in water bottles, how how how much can 0:15:12.800 --> 0:15:16.280 things change? That's a great question. You know our original colors, 0:15:16.280 --> 0:15:18.520 so we bought some core colors, you know, our ocean blue, 0:15:18.520 --> 0:15:20.680 which was the color I started with, the teak would 0:15:20.720 --> 0:15:23.400 bottle that looks like would. Those are our course best 0:15:23.400 --> 0:15:25.240 sellers and they really do make up the bulk of 0:15:25.240 --> 0:15:27.960 our business. But what our customers love about us is 0:15:28.000 --> 0:15:32.840 we're always innovating and Oftentimes our customers become collectors. They 0:15:32.880 --> 0:15:35.080 buy the bigger one because they hold a bottle of wine, 0:15:35.240 --> 0:15:38.200 or they buy the Lily Pulletzer collaboration because it matches 0:15:38.240 --> 0:15:41.680 their handbag or maybe their sweater. Um. We have found 0:15:41.680 --> 0:15:44.160 that customers have multiples at home, they take them to work, 0:15:44.200 --> 0:15:46.880 the gym, to school, and because we're always coming out 0:15:46.920 --> 0:15:50.280 with something that's on trend or something that our customers 0:15:50.320 --> 0:15:52.480 really cove, it that we can have these collections that 0:15:52.520 --> 0:15:54.320 come in and out all the time, even though those 0:15:54.360 --> 0:15:57.080 core best sellers are really driving the business forward. Now 0:15:57.080 --> 0:15:59.800 there's some estimates that you're doing at least if that 0:16:00.080 --> 0:16:03.000 more than a hundred million dollars in sales a year. 0:16:03.120 --> 0:16:08.440 Customers include Starbucks, Whole Foods, Jay Crew. But your first 0:16:08.440 --> 0:16:11.360 customer was the Harvard Business School. That's correct. I was 0:16:11.360 --> 0:16:14.000 an alumni and I really was hoping that I would 0:16:14.040 --> 0:16:16.560 able to convince them to use my bottles and go 0:16:16.600 --> 0:16:19.720 a little plastic free on campus. And they took up 0:16:19.760 --> 0:16:21.960 your offer. Yes, and even to this day they buy 0:16:21.960 --> 0:16:25.760 a bottle for every student. Now that's all great, but 0:16:25.840 --> 0:16:28.840 there was an Oprah moment that really kind of change things. 0:16:28.880 --> 0:16:31.040 Can you tell us about that sure so UM. In 0:16:31.080 --> 0:16:32.880 the early days when I was the only employee, I 0:16:32.920 --> 0:16:35.200 was also doing PR so I marched myself to the 0:16:35.240 --> 0:16:38.040 post office with a bottle in a box and addressed 0:16:38.080 --> 0:16:40.880 it to Oprah win Free, Chicago, Illinois. It made it 0:16:40.920 --> 0:16:43.480 to her senior editor, who actually took the bottle on 0:16:43.640 --> 0:16:46.360 her family vacation to Peru. She called me and said, 0:16:46.400 --> 0:16:48.760 I love this thing. It really works. I want to 0:16:48.760 --> 0:16:51.200 put it in a magazine. And really from there, I 0:16:51.200 --> 0:16:53.040 think that was the day we turned from a project 0:16:53.040 --> 0:16:56.000 into a business. So can you talk a little bit 0:16:56.040 --> 0:17:00.880 about how you got the capital to start with the manufacturing. 0:17:00.880 --> 0:17:04.359 Who were talking earlier about the challenges of credit for 0:17:04.640 --> 0:17:07.440 small businesses, So how did you start with that? Well, 0:17:07.480 --> 0:17:10.000 you know, Beim mentioned that I was recovering accountants, so 0:17:10.080 --> 0:17:12.200 I really did care a lot in the early days 0:17:12.240 --> 0:17:15.800 about immunity economics, and I used my personal savings, so 0:17:15.920 --> 0:17:18.480 I was very careful, even though it's making a small 0:17:18.520 --> 0:17:21.119 salary as an accountant, to always put money away, and 0:17:21.160 --> 0:17:23.480 it was my nest egg. It was my my future 0:17:23.520 --> 0:17:25.840 retirement savings that I was able to use to start 0:17:25.880 --> 0:17:29.240 manufacturing UM. But my first run of of product was 0:17:29.280 --> 0:17:32.000 only three thousand pieces. Um. I had a very small 0:17:32.040 --> 0:17:34.720 apartment and that's where the inventory was kept under my 0:17:34.760 --> 0:17:38.320 kitchen table um and really part of the reason, um, 0:17:38.400 --> 0:17:40.000 you know, I didn't raise money in the beginning. I 0:17:40.040 --> 0:17:42.399 was very careful about where the product was going to 0:17:42.480 --> 0:17:44.840 be sold. Part of it was for brand, and part 0:17:44.840 --> 0:17:46.880 of it was because I just didn't have very much 0:17:46.880 --> 0:17:49.119 inventory because I couldn't afford to buy more until I 0:17:49.160 --> 0:17:52.560 sold that first batch. When you open, you opened the boutique, 0:17:52.600 --> 0:17:55.920 I believe in Palm Beach, I did what was behind 0:17:56.040 --> 0:17:59.720 that because you've gone from that single boutique now I 0:17:59.760 --> 0:18:01.560 know you just did a deal I believe with Married 0:18:01.640 --> 0:18:07.200 International and their Elements hotel chain to put the bottles 0:18:07.240 --> 0:18:10.200 in the hotel business. You know. In the early days, 0:18:10.240 --> 0:18:12.320 I wanted to get as close to the customers as 0:18:12.320 --> 0:18:14.280 I could, so having a small store, it was a 0:18:14.280 --> 0:18:16.199 bit of a pop up store for six months, just 0:18:16.320 --> 0:18:18.520 listening to customers. What do they think about the product, 0:18:18.560 --> 0:18:21.320 what colors and finishes were they looking for. But to 0:18:21.440 --> 0:18:23.920 really scale the business, I had to start thinking about 0:18:23.960 --> 0:18:27.520 those big corporate partners and understanding are they looking for 0:18:27.600 --> 0:18:31.280 sustainability In the case of Marriott and in their elements 0:18:31.280 --> 0:18:33.680 brand or you know, are they really thinking about merchandise 0:18:33.720 --> 0:18:35.600 in the case of what we're doing with Starbucks. So 0:18:35.880 --> 0:18:39.080 it's it's great to have those small independent accounts. It's 0:18:39.119 --> 0:18:41.120 really how we built the business. I'm still in about 0:18:41.119 --> 0:18:43.320 two thousand small stores in the U S. And they 0:18:43.760 --> 0:18:45.760 just like the small businesses here at the conference, they 0:18:45.800 --> 0:18:49.480 really are the backbone of our business. But to really scale, 0:18:49.280 --> 0:18:52.280 I wanted to go with some of those bigger brands, Sarah, 0:18:52.520 --> 0:18:55.720 real quick, which country have you found to be the 0:18:55.720 --> 0:18:58.920 most fertile ground outside of the US for your business 0:19:00.160 --> 0:19:02.679 right now? It's Canada if you believe that, UM. But 0:19:02.840 --> 0:19:04.720 some of the countries that we're starting to move into, 0:19:04.760 --> 0:19:07.840 for example, we're just getting started in Japan. UM they're 0:19:07.840 --> 0:19:11.000 super interested in design and they love the design that 0:19:11.200 --> 0:19:13.000 UM that we have on the bottle. So if for me, 0:19:13.080 --> 0:19:15.280 it's a bit of a surprise if if a country 0:19:15.359 --> 0:19:18.159 is either looking for us for the sustainability angle, the 0:19:18.200 --> 0:19:21.080 fashion angle, or even the design angle, everybody seems to 0:19:21.119 --> 0:19:23.760 have something else that they sort of lean into UM. 0:19:23.800 --> 0:19:26.040 And luckily with well we have so many different messages. 0:19:26.640 --> 0:19:28.480 Sarah House, thank you so much for being with us. 0:19:28.480 --> 0:19:32.720 Sarak House chief executive officer of swell s Apostrophe W 0:19:32.920 --> 0:19:36.320 E l L. Talking about how she started that business 0:19:36.440 --> 0:19:53.000 and grew it to where it is today. Talking about 0:19:53.119 --> 0:19:56.800 financials and financial markets. Right now we are seeing uh, 0:19:56.920 --> 0:19:59.760 some declines across the board in US equity markets. And 0:20:00.000 --> 0:20:03.000 to understand uh, sort of how investors ought to be 0:20:03.080 --> 0:20:06.480 thinking about this volatility and navigating it is Jack Avalin, 0:20:06.520 --> 0:20:10.720 founding partner and chief investment officer at Crescent Wealth Advisers. Jack, 0:20:10.920 --> 0:20:13.560 thank you so much for joining us. I'd love to 0:20:13.600 --> 0:20:15.600