Latest / Bloomberg Intelligence / It's Like Nordstrom Without the Clothes

Transcript

It's Like Nordstrom Without the Clothes · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com Nordstrom. Yesterday,
• 0:33
  Speaker 1: the department store chain announced that it would open a
• 0:37
  Speaker 1: new quote neighborhood hub shop. In other words, this is
• 0:41
  Speaker 1: going to be a store that's smaller and has no merchandise,
• 0:45
  Speaker 1: and they're going to open this on October three in
• 0:47
  Speaker 1: West Hollywood, California. Did not go over well with investors.
• 0:50
  Speaker 1: The shares fell about three on the news. And here
• 0:53
  Speaker 1: to talk about this whole concept of window shopping with
• 0:57
  Speaker 1: no merchandise that could be potentially the new front of
• 1:00
  Speaker 1: retail is Punam Goyle. She is our own analysts that
• 1:04
  Speaker 1: covers Senior. She's our own retail analyst for Bloomberg Intelligence
• 1:08
  Speaker 1: and she joins us. Now, Punam, you know, I actually
• 1:11
  Speaker 1: thought this was not a terrible idea kind of moves
• 1:14
  Speaker 1: to the whole experience, kind of uh focus that a
• 1:18
  Speaker 1: lot of retailers are looking to do. What's the problem here?
• 1:21
  Speaker 1: What was what were investors responding so viscerally to? You know,
• 1:25
  Speaker 1: I don't know if the response yesterday was to this
• 1:27
  Speaker 1: directly or maybe something else, but I agree with you
• 1:31
  Speaker 1: and I think it's actually a neat concept. It's one
• 1:34
  Speaker 1: that more retailers should start thinking about how to drive
• 1:37
  Speaker 1: people in their stores and how to shrink their stories.
• 1:40
  Speaker 1: I mean, a three thousand square foot store versus their
• 1:43
  Speaker 1: typical hundred and forty thousand square foot store, that's uh,
• 1:48
  Speaker 1: you know, a big difference. And these three thousand square
• 1:51
  Speaker 1: footstores can go anywhere. Well, and Punam, can you give
• 1:55
  Speaker 1: us a sense of what these stores might look like,
• 1:58
  Speaker 1: what the experience would be walking in for a customer? Sure? So,
• 2:02
  Speaker 1: you know, you walk into these stores, you get a refreshment,
• 2:05
  Speaker 1: whether it's beer, wine, coffee, whatever it is. You said,
• 2:08
  Speaker 1: A personal stylist greets you. There's eight big dressing rooms.
• 2:12
  Speaker 1: They talk to you, they understand what you like, and
• 2:15
  Speaker 1: then they have you try on a few things, and
• 2:18
  Speaker 1: whatever you like, you can either come back and pick
• 2:21
  Speaker 1: it up later or it can be shipped directly to you.
• 2:24
  Speaker 1: So they'll have merchandise there, but that merchandise is not
• 2:27
  Speaker 1: for sale. Immediately you walk out bagless. I'm just trying
• 2:32
  Speaker 1: to wrap my head around this punam. And I understand,
• 2:34
  Speaker 1: you know, Lisa thinks it's not a terrible idea, that's
• 2:38
  Speaker 1: a great endorsement. Um, But you know, drinking wine, personal tailors.
• 2:43
  Speaker 1: How is all this scalable? How do you do this
• 2:45
  Speaker 1: with a company that's a fifteen billion dollars in sales?
• 2:49
  Speaker 1: You do it because you can have so many of
• 2:51
  Speaker 1: these stores. So nord Storm is coming to New York
• 2:54
  Speaker 1: City in full price store, a flagship store, a flagship store.
• 2:58
  Speaker 1: So why can't and this is really you know, me
• 3:00
  Speaker 1: thinking very out there. Why can't they add a three
• 3:03
  Speaker 1: thousand square foot store in Soho and use the flagship
• 3:06
  Speaker 1: store to fill that demand. They have a hundred and
• 3:08
  Speaker 1: twenty two full line stores. They can go into major
• 3:12
  Speaker 1: shopping destinations and add these smaller stores and use their
• 3:17
  Speaker 1: hubs to fill the demand. So totally, I actually I
• 3:20
  Speaker 1: totally see this, PIM because if you think about it,
• 3:22
  Speaker 1: I enjoy a glass of wine. I want to talk about,
• 3:25
  Speaker 1: you know, what the latest trends are, and try things
• 3:27
  Speaker 1: on and make sure things fit all right before you
• 3:29
  Speaker 1: order it online. And uh, you know, not only that,
• 3:31
  Speaker 1: but putam, is there any discussion about creating other aspects
• 3:35
  Speaker 1: of the experience. I mean, I know that like, for example,
• 3:37
  Speaker 1: the M and M store in Times Square had a
• 3:41
  Speaker 1: very kind of playful environment, or the old fo Schwartz
• 3:45
  Speaker 1: with the the clock and the how did that do? Yeah,
• 3:51
  Speaker 1: and just but that's okay. Well no, I was gonna say,
• 3:55
  Speaker 1: you know, to go back to your point about you know, Okay,
• 3:57
  Speaker 1: so that norths To opens the flagship store in New York,
• 3:59
  Speaker 1: and so they're going to do a smaller square foot
• 4:02
  Speaker 1: maybe a five thousand, three thousand square foot store in Soho. Well,
• 4:06
  Speaker 1: the reason they're not going to make any money there
• 4:08
  Speaker 1: is because it costs four point three million dollars a
• 4:10
  Speaker 1: year for a five thousand square foot storefront in Soho.
• 4:14
  Speaker 1: It's expensive. Everywhere you want to go, it is expensive.
• 4:17
  Speaker 1: But just think about the traffic that they get into
• 4:20
  Speaker 1: those stories and the sales they can get out of
• 4:22
  Speaker 1: that three thousand square foot box. I mean, look, I
• 4:24
  Speaker 1: don't know exactly what these stores are gonna look like,
• 4:26
  Speaker 1: but I would be more than happy to go in
• 4:28
  Speaker 1: for a petty manny and um, look for some clothes
• 4:30
  Speaker 1: while I'm doing that, and try him on, and then
• 4:33
  Speaker 1: walk out and have it sent to my home and
• 4:35
  Speaker 1: walk out without a bag because you don't want to
• 4:37
  Speaker 1: carry a bag everywhere you go anymore. For all the
• 4:39
  Speaker 1: men out there, a manny petty is a manicure pedicure.
• 4:42
  Speaker 1: And I agree with you, But I also think that
• 4:44
  Speaker 1: there has to do uh there there There has to
• 4:46
  Speaker 1: be an advertising element of this as well, right, I mean,
• 4:49
  Speaker 1: if you think about at the four point three million
• 4:51
  Speaker 1: dollars that it costs to have that space, if they
• 4:54
  Speaker 1: have incredible foot traffic, if they have an experience that
• 4:57
  Speaker 1: gets the word at the word out, that seems to
• 4:59
  Speaker 1: be a destination for people, I mean, that's that's advertising.
• 5:03
  Speaker 1: That's worth it for them, right. Yeah. Not every three
• 5:06
  Speaker 1: thousand square foot store will cost them that much money.
• 5:08
  Speaker 1: I mean there are other areas, densely populated areas that
• 5:11
  Speaker 1: they could go into with these smaller footprints that maybe
• 5:14
  Speaker 1: don't cost that much money. All right, So let's let
• 5:18
  Speaker 1: all kidding aside. Though, how many do they intend to have?
• 5:22
  Speaker 1: Any idea how many of these new kinds of formats
• 5:25
  Speaker 1: do they intend to open? And what precludes the competition
• 5:29
  Speaker 1: from opening another small three thousand square foot space right
• 5:32
  Speaker 1: next door. So so far one, Um, no announcements of
• 5:36
  Speaker 1: anything further than that. There maybe one in Toronto, but UM,
• 5:39
  Speaker 1: it's just you know, they haven't announced anything further. I
• 5:42
  Speaker 1: think they're going to test and try, see how it goes,
• 5:45
  Speaker 1: and then we'll hear more. As far as competition, why not,
• 5:49
  Speaker 1: I mean, why isn't everyone thinking of something similar or different?
• 5:53
  Speaker 1: We saw colds just uh, I think over a week
• 5:56
  Speaker 1: ago announced at Amazon coming intent of their stores to showcase,
• 6:00
  Speaker 1: ace test and try Amazon branded goods. So people are
• 6:03
  Speaker 1: thinking retailer, they're thinking outside the box. They're trying to
• 6:06
  Speaker 1: find ways to drive traffic and use the box more productively. Well,
• 6:10
  Speaker 1: I think that it's fascinating. And I imagine that they'll
• 6:12
  Speaker 1: also have people who help, uh style different outfits and
• 6:16
  Speaker 1: looks for people, so there'll be more of that kind
• 6:18
  Speaker 1: of tailor experience as well. Right, Yeah, and then and
• 6:21
  Speaker 1: then you get a fitted to. They have a tailoring
• 6:22
  Speaker 1: service on siting. I mean that's just you know, one
• 6:25
  Speaker 1: stop shop if you're a north Strom shopper or our
• 6:28
  Speaker 1: north Strom potential shopper that you know would be interested
• 6:31
  Speaker 1: in clothes from the ore Shoes put them Goyle, thank
• 6:34
  Speaker 1: you so much for joining us. Put him. Goyle, a
• 6:36
  Speaker 1: senior retail analyst for Bloomberg Intelligence, talking about this new
• 6:40
  Speaker 1: window shopping no merchandise store concept and uh, it's interesting. Nonetheless,
• 6:46
  Speaker 1: it's interesting to see retailers think outside the box and
• 6:48
  Speaker 1: try to uh come up with new experiences in a
• 6:51
  Speaker 1: time when people really do order so much online. Mark
• 7:07
  Speaker 1: Usco has had some harsh words for certain e t
• 7:09
  Speaker 1: F s. He called one slice of the funds one
• 7:13
  Speaker 1: of the worst things ever created. Now he's starting his
• 7:17
  Speaker 1: own e t F. Marc Usco joins us now Marcusco
• 7:19
  Speaker 1: as chief executive officer and chief investment officer of Morgan
• 7:23
  Speaker 1: creekt Capital Management, which oversees almost three billion dollars in
• 7:26
  Speaker 1: Chapel Hill, North Carolina. Mark, So, what convinced you to
• 7:30
  Speaker 1: plow into this territory that you've had such criticism for
• 7:34
  Speaker 1: about in the past few years. Well, at Lisa, you know,
• 7:37
  Speaker 1: I think it's important to note that I've actually never
• 7:41
  Speaker 1: been a critic of E t F as a structure. Yeah,
• 7:45
  Speaker 1: I think I think DTF structure is is quite a
• 7:47
  Speaker 1: good one. What I was critical of is is certain
• 7:50
  Speaker 1: strategies and the one that I did call, you know,
• 7:52
  Speaker 1: maybe the worst invention perpetuated against investors in a long time.
• 7:56
  Speaker 1: With this idea of low volatility, where you buy stock
• 8:01
  Speaker 1: only based on the volatile e of its price, no
• 8:05
  Speaker 1: regard to fundamentals, no regard to how the company performs.
• 8:09
  Speaker 1: It seems like a really bad idea to buy something
• 8:11
  Speaker 1: no matter what the prices and whatever the value is.
• 8:14
  Speaker 1: So the structure of ets IS is a really good one,
• 8:17
  Speaker 1: and I think the biggest reason for us to to
• 8:20
  Speaker 1: kind of crossover is we've been involved in the alternatives
• 8:23
  Speaker 1: world for a very long time, and that basically meant
• 8:27
  Speaker 1: that the SEC said, you know, if you weren't wealthy,
• 8:30
  Speaker 1: you couldn't have access because of all the restrictions against
• 8:34
  Speaker 1: the credited investors and qualified purchasers. So this is the
• 8:37
  Speaker 1: way to bring our styles and strategies that we think
• 8:40
  Speaker 1: are really good ways to manage capital, honed in our
• 8:43
  Speaker 1: endowment experience, into the world of the average investor. So, Mark,
• 8:48
  Speaker 1: will this exchange traded fund? Will it be passive or active?
• 8:53
  Speaker 1: It'd be active, And I think that's a really important point,
• 8:55
  Speaker 1: you know, although I get kind of buggy on this
• 9:00
  Speaker 1: on this word to PIM and that the word passive
• 9:04
  Speaker 1: is kind of a misnomer and that these things aren't passive, right.
• 9:08
  Speaker 1: You know, most of the stocks in the sp SP
• 9:11
  Speaker 1: weren't there thirty years ago. There's been I think turnover.
• 9:15
  Speaker 1: It's just slow active and they're really momentum based strategies
• 9:19
  Speaker 1: because of the capitalization waiting in most of these index ones.
• 9:23
  Speaker 1: So I don't really like the term passive, but you
• 9:25
  Speaker 1: know passive is indexing, and that all the other things.
• 9:28
  Speaker 1: This will definitely be active in the sense that it's
• 9:30
  Speaker 1: going to take our best ideas that we come up
• 9:33
  Speaker 1: with once a year in our our primary themes, and
• 9:37
  Speaker 1: then trade within the year around those those best ideas
• 9:41
  Speaker 1: and try to deliver. You know, we think alpha because
• 9:44
  Speaker 1: to us, alpha is smart. You know, there's this whole
• 9:47
  Speaker 1: thing called smart beta. Beta actually is dumb, not meaning unintelligent,
• 9:52
  Speaker 1: but it's rule based. Alpha is where the smart part
• 9:54
  Speaker 1: of asset management is. So mark you set the best
• 9:58
  Speaker 1: ideas once a year. Correct, Yes, those are the big themes,
• 10:01
  Speaker 1: so kind of ten big themes that we think have
• 10:05
  Speaker 1: you know, about a fifty fifty chance of happening. But
• 10:07
  Speaker 1: if they do happen, they'll present up you big upside
• 10:11
  Speaker 1: return opportunities. You know, this year, a good example would
• 10:13
  Speaker 1: have been short the dollar. Everybody thought the dollar was
• 10:17
  Speaker 1: going up this year. In fact, of those surveyed on
• 10:20
  Speaker 1: Bloomberg and other places thought the dollar was going up.
• 10:22
  Speaker 1: So if you were short the dollars this year, you've
• 10:24
  Speaker 1: made a lot of money. And if you were long
• 10:25
  Speaker 1: the rem and B, which was the opposite of what
• 10:28
  Speaker 1: most people were doing last year. So Mark, currently, what's
• 10:31
  Speaker 1: one of your best ideas? So you know, well, short
• 10:35
  Speaker 1: the dollars is still you know, one of our our
• 10:37
  Speaker 1: top ten ideas. Uh. We also like the idea that
• 10:41
  Speaker 1: that interest rates are going to continue to go down,
• 10:44
  Speaker 1: not up. Uh. You know, everybody thought interest rates we're
• 10:47
  Speaker 1: gonna rally really hard after the Trump victory, and and
• 10:50
  Speaker 1: they did for a few weeks. And they started the
• 10:52
  Speaker 1: year at two sixty an hour down to to sixteen.
• 10:55
  Speaker 1: And that's a surprise to everybody. But are probably our
• 10:58
  Speaker 1: biggest one is this wealth transfer from the developing world.
• 11:03
  Speaker 1: Two I started from the developed world to the developing world.
• 11:06
  Speaker 1: And we think emerging markets are are going to continue
• 11:09
  Speaker 1: to be the place to be. They're gonna have a
• 11:11
  Speaker 1: decade of dominance for the next ten years. And while
• 11:14
  Speaker 1: we think the US market is going to struggle to
• 11:16
  Speaker 1: make any return, um basically be flat for a decade,
• 11:20
  Speaker 1: just like from two thousand to two thousand and ten,
• 11:22
  Speaker 1: we think emerging markets could could compound in the high
• 11:25
  Speaker 1: single digits, even low double digits. Hey, Mark, what happens
• 11:28
  Speaker 1: if one of these ideas goes bust? Well, you know
• 11:32
  Speaker 1: they will, right, I mean, we're not gonna get them,
• 11:34
  Speaker 1: all right. Uh, And that's why it's going to be
• 11:36
  Speaker 1: an actively managed et F. It's great question. Um, so
• 11:40
  Speaker 1: that you know, we we think one of the strengths
• 11:42
  Speaker 1: of of the endowment model. You know we've lived our
• 11:45
  Speaker 1: our whole careers is is the risk management. Focus on
• 11:48
  Speaker 1: risk management, focus on protection of capital first, growth of capital. Second.
• 11:53
  Speaker 1: You know, if you take care of the losses, the
• 11:54
  Speaker 1: gains take care of themselves. The stop loss on each
• 11:59
  Speaker 1: of the positions. I mean, do you say to yourself,
• 12:01
  Speaker 1: all right, if this is that, if this goes down
• 12:03
  Speaker 1: more than seven in the next six months, I'm out
• 12:06
  Speaker 1: of here. Again, really important question. We don't we don't
• 12:10
  Speaker 1: like those rules based stop losses because what we think
• 12:14
  Speaker 1: that does is is it. It tends to what people
• 12:17
  Speaker 1: do is they buy high and they sell low. We
• 12:20
  Speaker 1: rather try to only buy things when there's a margin
• 12:23
  Speaker 1: of safety, so that some decline in price is actually
• 12:27
  Speaker 1: okay and actually gives you an opportunity to buy more
• 12:29
  Speaker 1: of something as long as you're below fair value. So
• 12:33
  Speaker 1: you know, if it turns out that you you know,
• 12:35
  Speaker 1: made a miscalculation on fair value or you know, just wrong,
• 12:39
  Speaker 1: or the trend changes, you know, then you've just got
• 12:41
  Speaker 1: to step to the side. And that that's really more
• 12:43
  Speaker 1: of a judgment call. And that's where I think the
• 12:46
  Speaker 1: difference between active management and passive management really comes to
• 12:49
  Speaker 1: bears is the whole concept of judgment. Passive has no judgment.
• 12:53
  Speaker 1: It's not allowed to have judgment. It has to buy whatever.
• 12:57
  Speaker 1: You know, the rule says it's going to buy no
• 12:59
  Speaker 1: matter what the price, no matter what the value. Well,
• 13:01
  Speaker 1: we're gonna see what happens, right, We're gonna see where
• 13:03
  Speaker 1: your et F is gonna come out, and we'll we'll
• 13:05
  Speaker 1: check in with you to see whether this new uh
• 13:07
  Speaker 1: sort of actively managed e t F will grow to
• 13:11
  Speaker 1: fruition as you describe. Thanks very much, Mark Usko, Chief
• 13:14
  Speaker 1: Executive Officer, and Chief Investment Officer, Morgan Creek Capital Management.
• 13:29
  Speaker 1: I want to bring in John Butler to learn more
• 13:32
  Speaker 1: about the Apple launch. John, in your world, is this
• 13:35
  Speaker 1: you know? Is this like Christmas, Thanksgiving and I don't know,
• 13:38
  Speaker 1: New Year's all rolled into one. Well, it's a big
• 13:41
  Speaker 1: Christmas this year, PIM because we get an extra iPhone
• 13:44
  Speaker 1: under the tree. Um, Apple for the first time in
• 13:48
  Speaker 1: a long time, is coming out with a product line extension,
• 13:52
  Speaker 1: and it's a perfect year to do it because it
• 13:54
  Speaker 1: is the tenth anniversary of the iPhone. The latest rumor
• 13:59
  Speaker 1: and there have been a lot rumors about what it's
• 14:01
  Speaker 1: going to be called, but apparently it's it's going to
• 14:03
  Speaker 1: be called the iPhone ten and Um it's at the
• 14:07
  Speaker 1: very high end of the market, so a lot of
• 14:09
  Speaker 1: people are talking about the high price, the thousand dollar
• 14:12
  Speaker 1: plus price point. But I think I think it comes
• 14:16
  Speaker 1: with a pretty significant redesign. They're taking the home button off.
• 14:21
  Speaker 1: It's a LED screen, so which are beautiful screens by
• 14:25
  Speaker 1: the way, Samsung uses O lead and you get black
• 14:28
  Speaker 1: or blacks and whiter whites. Um, and it's gonna be
• 14:33
  Speaker 1: a large screen, larger than the iPhone seven plus by
• 14:37
  Speaker 1: about point three inches, so they're the screen sizes are
• 14:42
  Speaker 1: getting up there, and I think Apple is positioning it
• 14:44
  Speaker 1: to compete with Samsung's new Note eight, which has actually
• 14:49
  Speaker 1: had a lot of demand for that, so it seems
• 14:52
  Speaker 1: like they have some stiff competition. It does, and it's
• 14:54
  Speaker 1: priced at n fifty dollars, so it's at a similar
• 14:57
  Speaker 1: price point. It's discounted basically, right. But you know, John,
• 15:00
  Speaker 1: I'm sorry, I personally have this visceral reaction to the
• 15:03
  Speaker 1: frenzy that Apple is able to whip everyone up into.
• 15:08
  Speaker 1: Can any other company creates such a glut of just
• 15:13
  Speaker 1: natural advertising, just everyone talking Apple phone, Apple phone, Apple
• 15:17
  Speaker 1: phone all the time? I mean, why is there such
• 15:20
  Speaker 1: an excitement over this? The roots are in Steve Jobs.
• 15:24
  Speaker 1: Like Steve Jobs, you know, with the initial iPhone announcement
• 15:29
  Speaker 1: ten years ago, that was really something. I mean, it
• 15:33
  Speaker 1: was a brand new device. He had basically taken what
• 15:36
  Speaker 1: was up to that point a consumer electronics device and
• 15:40
  Speaker 1: turned it into this appealing accessory. And in the years
• 15:44
  Speaker 1: that followed, of course Jobs did a great did a
• 15:47
  Speaker 1: tremendous job, no pun intend. Well, do you think that
• 15:52
  Speaker 1: this new iPhone will elevate the product to a new level,
• 15:58
  Speaker 1: so they can even be considered a somewhat new innovation, right,
• 16:01
  Speaker 1: because that's that's been one challenge for Apple is that
• 16:03
  Speaker 1: they really haven't come up with a new hit. They
• 16:07
  Speaker 1: have not come up with a new hit. What they're
• 16:09
  Speaker 1: looking to do, Lisa is broaden the category a little bit.
• 16:14
  Speaker 1: So they're going to the ultra high end. There are
• 16:16
  Speaker 1: a premium phone player, but they've never had a true
• 16:19
  Speaker 1: match for the Note Samsung Note eight now um, and
• 16:24
  Speaker 1: so I sort of view this as an important event
• 16:27
  Speaker 1: because you're getting in a typical refresh by the way
• 16:30
  Speaker 1: you get to new phones. We're now getting three, including
• 16:33
  Speaker 1: this high end phone. So I think it's a big deal.
• 16:37
  Speaker 1: And I think all the excitement is reflective of the
• 16:40
  Speaker 1: power of the Apple brand. They really do have a
• 16:43
  Speaker 1: great global brand. Yeah, they also know how to leverage it.
• 16:46
  Speaker 1: I was gonna say, they also do two hundred and
• 16:48
  Speaker 1: three billion dollars in sales a year, So do anything
• 16:52
  Speaker 1: that a company of that size does, you're gonna want
• 16:54
  Speaker 1: to pay attention to it. So the challenge now for
• 16:56
  Speaker 1: Apple is they need to go from hardware innovations to
• 16:59
  Speaker 1: can tell people to upgrade the more software and so
• 17:02
  Speaker 1: what I'm looking for in today's event is what are
• 17:06
  Speaker 1: we getting in the way a new content, new services,
• 17:10
  Speaker 1: um adjacent product markets. I hear we're getting a new
• 17:13
  Speaker 1: watch that is going to be completely free of the iPhone,
• 17:17
  Speaker 1: which this one will tell time terrific. It may tell time.
• 17:20
  Speaker 1: That's we'll see what I mean. I mean, I understand
• 17:24
  Speaker 1: this whole you know ecosystem with Apple and so on,
• 17:27
  Speaker 1: But I I thought that the challenge that Apple really has,
• 17:29
  Speaker 1: never mind the one thousand dollar price tag, but is
• 17:31
  Speaker 1: getting people in China to buy their products. It's getting
• 17:35
  Speaker 1: people in China, which is matured, and now it's getting
• 17:38
  Speaker 1: in India, which I think is a long shot. We
• 17:42
  Speaker 1: did a report taking a close look at that market.
• 17:46
  Speaker 1: The monster portion of that market is at the low
• 17:48
  Speaker 1: end price below two fifty dollars. I think Apple doesn't
• 17:52
  Speaker 1: stand a chance personally. But you know, it's interesting that
• 17:55
  Speaker 1: you focus on content. I wonder how much of this
• 17:58
  Speaker 1: is also geared at creating customer data. There's been a
• 18:02
  Speaker 1: lot of talk about one big benefit that Google and
• 18:07
  Speaker 1: Facebook have over Apple and the long term is that
• 18:10
  Speaker 1: they have amazing access to all of the customer data.
• 18:15
  Speaker 1: Amazon also, where's Apple in this nowhere yet. But that's
• 18:20
  Speaker 1: where the content comes in, right, because if you're producing
• 18:23
  Speaker 1: original programming, or even if you're not producing your own programming,
• 18:28
  Speaker 1: you can benefit from the ad dollars and targeted ad
• 18:31
  Speaker 1: dollars at that based on what you know about your
• 18:34
  Speaker 1: user base. So when you heard Verizon originally give the
• 18:38
  Speaker 1: hard sell on leveraging content at A O, L and Yahoo,
• 18:43
  Speaker 1: they were talking about leveraging what they know about their
• 18:45
  Speaker 1: wireless customers, A T and T is probably going to
• 18:49
  Speaker 1: do the same thing, and Apple is in a great
• 18:51
  Speaker 1: position to do the same. So again I'm looking for
• 18:55
  Speaker 1: new a new maybe streaming video service coming this afternoon. Um,
• 19:02
  Speaker 1: they've made some big hires out of Sony, so they
• 19:05
  Speaker 1: have a great content team. Where's it going now, that's
• 19:08
  Speaker 1: the big question. Just to follow up on what you
• 19:10
  Speaker 1: said about A T and T and Verizon, the chief
• 19:13
  Speaker 1: executive of A T and T, Randall Stevenson, today saying
• 19:16
  Speaker 1: expect the time, want to deal to close by the
• 19:18
  Speaker 1: end of the year. And oh yes, if you're interested
• 19:21
  Speaker 1: in HBO, it'll be free to all wireless customers that
• 19:26
  Speaker 1: have an unlimited plant. So there that's an answer to
• 19:30
  Speaker 1: T Mobile coming out the other day giving free Netflix
• 19:34
  Speaker 1: to people, and so, not to go off on a tangent,
• 19:38
  Speaker 1: but with the talent, But that's the same kind of
• 19:40
  Speaker 1: thing you're talking about with Apple. Yeah, it's okay, you
• 19:42
  Speaker 1: got the device, you're gonna need the content. Yeah. For
• 19:45
  Speaker 1: the telcos, they're dealing with the same market maturity, and
• 19:48
  Speaker 1: it's led to pricing pressure and wireless. How low can
• 19:52
  Speaker 1: you go on price before you hurt yourself? And what
• 19:54
  Speaker 1: do you do instead? You add value to that commoditized
• 19:59
  Speaker 1: service and their owing it with content And so a
• 20:02
  Speaker 1: T and T is merely responding to what T Mobile
• 20:04
  Speaker 1: did by giving Netflix away for free for T Mobile
• 20:08
  Speaker 1: one subs on family plants. How far away are we
• 20:11
  Speaker 1: from peak content? I don't cover content, so that's a
• 20:16
  Speaker 1: tough call, but it's something I'm watching. It's getting to
• 20:18
  Speaker 1: be an awfully crowded market. But it's interesting to see
• 20:22
  Speaker 1: where content is going. It's moved from long form sit
• 20:25
  Speaker 1: in front of the TV in your living room and
• 20:27
  Speaker 1: watch it for an hour, to short form watching it
• 20:30
  Speaker 1: on a smartphone. So in that sense, the ball is
• 20:34
  Speaker 1: moving into Apple's court, not away from it. Yeah, we're
• 20:37
  Speaker 1: all a d D now, John Butler, thank you so
• 20:38
  Speaker 1: much for joining us. Always a pleasure to speak with you.
• 20:41
  Speaker 1: John Butler has senior Telecom Services and Equipment analyst for
• 20:44
  Speaker 1: Bloomberg Intelligence, talking all things Apple, Apple, Apple, Apple, the
• 20:49
  Speaker 1: new iPhone. Let's turn our attention now to infrastructure and
• 21:04
  Speaker 1: utilities when it comes to the aftermath of Hurricane Irma.
• 21:09
  Speaker 1: Joining us as Kit Connledge, he is our senior Industrials
• 21:12
  Speaker 1: and Utilities analysts for Bloomberg Intelligence. He joins us here
• 21:16
  Speaker 1: on our eleven three oh studio. Kit, thanks for coming in.
• 21:19
  Speaker 1: Maybe just give us an update. I was looking at
• 21:22
  Speaker 1: some headlines that said that about six and a half
• 21:24
  Speaker 1: million customers are without electricity, but you brought your spreadsheets
• 21:29
  Speaker 1: and you've got more detailed. Well, the it looks to
• 21:32
  Speaker 1: me like the latest from the grid operator in Florida,
• 21:36
  Speaker 1: UH indicates that we're damned to about five and a
• 21:39
  Speaker 1: half million outages now. So uh, they're obviously getting to
• 21:44
  Speaker 1: the low hanging fruit first, let's put it that way.
• 21:47
  Speaker 1: So the further south you were, the quicker the hurricane
• 21:51
  Speaker 1: went through. So those guys are getting fixed now pretty readily.
• 21:56
  Speaker 1: Presumably the keys are going to have a hard time
• 21:58
  Speaker 1: getting fixed, but there's not that many electric connections and
• 22:01
  Speaker 1: the keys. So um as you fix up Marco Island
• 22:06
  Speaker 1: and up the west coast than FPL completes this, it's work.
• 22:09
  Speaker 1: But the North Central Florida, Florida Power and Light is
• 22:14
  Speaker 1: the one and North Central Florida, where Duke Power Florida
• 22:18
  Speaker 1: is has still a higher percentage of their outages remaining.
• 22:23
  Speaker 1: Can you give us a sense of the scope of
• 22:26
  Speaker 1: what it will take to get power online. Are we
• 22:28
  Speaker 1: talking about down to power lines that need to be
• 22:31
  Speaker 1: just put up and re strong or is there more
• 22:34
  Speaker 1: substantive damage to the infrastructure. From what I've seen, the
• 22:37
  Speaker 1: utilities haven't really determined yet how much uh real deep
• 22:43
  Speaker 1: seated uh problem they're going to have with the infrastructure.
• 22:47
  Speaker 1: It uh you know, the initial things they're indicating seem
• 22:51
  Speaker 1: to be maybe not as bad as could have been expected.
• 22:54
  Speaker 1: So a lot of the power plants, which obviously are uh,
• 22:58
  Speaker 1: if you will, most important, uh don't seem to have
• 23:00
  Speaker 1: been affected. And then you have these things that you
• 23:03
  Speaker 1: uh you call the substations, which are like billion dollar
• 23:07
  Speaker 1: installations that connect high power lines to low power lines.
• 23:12
  Speaker 1: They were raised and they shouldn't have been flooded. That
• 23:15
  Speaker 1: was the purpose of all this work they did in
• 23:17
  Speaker 1: the last ten years. We'll see how well that turns
• 23:20
  Speaker 1: out well and then a kid going forward. This is
• 23:23
  Speaker 1: going to be expensive. And I'm just wondering what the
• 23:26
  Speaker 1: financial condition of UH next eras Flora, Florida Power and
• 23:29
  Speaker 1: like which you were talking about, Tampa Electric, Duke Energy,
• 23:32
  Speaker 1: Florida Southern Companies, Gulf Power, and Georgia Power. I mean,
• 23:35
  Speaker 1: how how are they going to afford this? Well, that's
• 23:38
  Speaker 1: a very fair question. I would say that for next year,
• 23:43
  Speaker 1: and Duke and and the Southern companies subsidiaries and Southern
• 23:47
  Speaker 1: got hit in Georgia Power as well. Of course. UH.
• 23:51
  Speaker 1: Those are all companies in the range of fifty billion
• 23:55
  Speaker 1: market caps. So even uh, you know, a bill in
• 24:00
  Speaker 1: the billions for them, and even assuming they had trouble
• 24:03
  Speaker 1: collecting it from the ratepayers, which in theory they're allowed
• 24:07
  Speaker 1: to do, UH, there's no existential threat to those kind
• 24:11
  Speaker 1: of companies. UM. Tampa Electric has a smaller UH company,
• 24:16
  Speaker 1: so there may be something there. They're a subsidiary of Amero,
• 24:20
  Speaker 1: which is a Canadian company. Can't Uh. This is going
• 24:25
  Speaker 1: to require, as you mentioned, a lot of work. It's
• 24:27
  Speaker 1: gonna require a lot of people. One estimate by the
• 24:31
  Speaker 1: chief executive of Southern Company, Thomas Fanning. He said that
• 24:36
  Speaker 1: they might need between fifty and sixty thousand workers from
• 24:40
  Speaker 1: all over the US and Canada in order to actually
• 24:43
  Speaker 1: rebuild the Florida infrastructure. From from what I've seen the
• 24:49
  Speaker 1: companies across the country UH putting out and press releases.
• 24:53
  Speaker 1: They're flocking in literally from all over the country and
• 24:57
  Speaker 1: probably from Canada as well. UH. It's it's a good
• 25:02
  Speaker 1: thing for the utilities from out of town to do. UH.
• 25:06
  Speaker 1: Turnabout is fair play if something happens to them they
• 25:09
  Speaker 1: want There's a lot of uh of cooperation and the
• 25:14
  Speaker 1: utility industry for these kind of natural disasters. They're not
• 25:17
  Speaker 1: direct competitors here. Once their power lines are down, then
• 25:22
  Speaker 1: everybody wants to help. Plus they get paid for it,
• 25:24
  Speaker 1: so it's it all adds up pretty well. But everybody
• 25:28
  Speaker 1: knows in the industry that it's important to the local
• 25:31
  Speaker 1: utility to get the power back on. And if you
• 25:35
  Speaker 1: wait more than a week, uh, people start grumbling. And
• 25:40
  Speaker 1: it's not obviously always in your control, but they can
• 25:44
  Speaker 1: empathize because they've all been through this that if you
• 25:47
  Speaker 1: have problems getting everything connected rapidly, UH people are going
• 25:52
  Speaker 1: to start to complain and that's always bad for utility.
• 25:55
  Speaker 1: Kit Conneledge, thank you so much for joining us. Kick
• 25:57
  Speaker 1: connel Edge is senior Industrials and Utilities Utilities analyst for
• 26:01
  Speaker 1: Bloomberg Intelligence Intelligence if I can speak today, joining us
• 26:05
  Speaker 1: in our Bloomberg eleven three oh studios here in New York.
• 26:08
  Speaker 1: And while it wasn't as bad as we thought, Hurricane
• 26:12
  Speaker 1: Irma did cause devastation in the Keys, and the Pentagon
• 26:16
  Speaker 1: is now saying that ten thou people still may need
• 26:19
  Speaker 1: to be evacuated from that region. Thanks for listening to
• 26:25
  Speaker 1: the Bloomberg p m L podcast. You can subscribe and
• 26:28
  Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast
• 26:32
  Speaker 1: platform you prefer. I'm pim Fox. I'm on Twitter at
• 26:35
  Speaker 1: pim Fox. I'm on Twitter at Lisa Abramo. It's one
• 26:39
  Speaker 1: before the podcast. You can always catch us worldwide on
• 26:42
  Speaker 1: Bloomberg Radio.