Latest / Bloomberg Intelligence / Eaton Vance's Peabody Sees Opportunities in High-Yield

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Eaton Vance's Peabody Sees Opportunities in High-Yield · Bloomberg Intelligence

• 0:00
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  Speaker 1: co host Lisa Abramowitz. Each day we bring you the
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  Speaker 1: most important, noteworthy, and useful interviews for you and your money,
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  Speaker 1: whether at the grocery store or the trading floor. Find
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  Speaker 1: the Bloomberg P and L Podcast on iTunes, SoundCloud and
• 0:36
  Speaker 1: at Bloomberg dot com. Target is in the spotlight today,
• 0:45
  Speaker 1: or should I say on the hot seat. It shares
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  Speaker 1: plunging the most in more than eight years, down more
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  Speaker 1: than twelve per cent, after announcing plans to cut prices
• 0:55
  Speaker 1: to get customers back in the door. I want to
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  Speaker 1: bring in Burt Fleckinger, man ing director at Strategic Resource Group,
• 1:02
  Speaker 1: for more insight on what's behind the plummeting shares and
• 1:07
  Speaker 1: the potentially UH negative outlook. But did this come as
• 1:11
  Speaker 1: a surprise to you? No surprised Lisa's As we talked
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  Speaker 1: in earlier Bloomberg broadcast anyone has seen in the stores.
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  Speaker 1: Just problems in Syriotom for example, for Christmas Hanukah, Kwanza
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  Speaker 1: through Valentine's Day, finding fashion, jewelry, Department's most important department
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  Speaker 1: in the store, unstaff, do you have to ring a
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  Speaker 1: bell for service waiting for godo? Nobody comes to serve
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  Speaker 1: the shoppers, People walk out, go to Cole's, Walmart, Walmart,
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  Speaker 1: Sears Kmart and uh the company's off course and uh
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  Speaker 1: the new definition of being rudderless for Target retail, which
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  Speaker 1: is very un characteristic for the company. Well, butt, You've
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  Speaker 1: got a company, it's got a market cap of thirty
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  Speaker 1: two billion, They've got about two and a half billion
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  Speaker 1: in cash, their threety one thousand employees. What can Brian
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  Speaker 1: Cornell do in order to turn this surround? Is it worth?
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  Speaker 1: Is it worth what it's being priced at right now,
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  Speaker 1: which is fifty eight dollars a share them it's a
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  Speaker 1: good price right now. That Bloomberg Terminals reporting a five
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  Speaker 1: year low UH for Target flat over five years compared
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  Speaker 1: to the S and P being up over sevent same time,
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  Speaker 1: your present point on Target needs to UH take cash
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  Speaker 1: off its balance sheet, invest in capex, they're distinct disadvantage Kroger, Walmart, Coles,
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  Speaker 1: H and M everybody they compete with because Targets outsourced
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  Speaker 1: just about everything. Outsource distribution cost the goods are too
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  Speaker 1: high to leass present point on prices. UH. Target spacing
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  Speaker 1: a price war, pervasive price war of unprecedented proportions for
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  Speaker 1: for the next few to five years. UH, Walmart, Legal,
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  Speaker 1: et cetera. Because they're they're cat of goods or lower
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  Speaker 1: targets keeps getting higher from outsourcing. Target needs well. But
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  Speaker 1: hang on, Burt, But I mean I was looking at
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  Speaker 1: Brian Cornelli's biography. He's the chief executive of Target and
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  Speaker 1: the chairman. I mean he was the CEO of Sam's Club.
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  Speaker 1: He also was the CEO of the America's Food division
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  Speaker 1: for PepsiCo. Is he the one that's going to make
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  Speaker 1: this happen or do they need new talent in the
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  Speaker 1: in the boardroom him? It's uh, Lisa Brownham. What's his
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  Speaker 1: Bloomberg hot hot seat up in Minnesota, Brian, Brian Cornell
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  Speaker 1: has got one more fiscal to deliver. Uh. It looks
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  Speaker 1: look like he's going to bring great new leadership to
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  Speaker 1: the company. But with John Stump, who now left on
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  Speaker 1: the board other board members of sleep at the switch,
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  Speaker 1: kind a Rip Van Winkle routine. Uh, you need new leadership,
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  Speaker 1: and regrettably it's almost like a Mackenzie like monarchy with
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  Speaker 1: the consultants half running the company and erroneous assumptions, erroneous conclusions.
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  Speaker 1: They need to invest in Target dot Com. They need
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  Speaker 1: to invest in self distribution. Uh, and they need to
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  Speaker 1: invest in staffing instead of cutting hours and and having
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  Speaker 1: shells that are too empty that impair the same store
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  Speaker 1: sales and operating income. You know, there's there's a quote
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  Speaker 1: in the Bloomberg story about Targets results from one analyst saying,
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  Speaker 1: we are stunned. We thought they were going the other
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  Speaker 1: way with higher margins stuff. I mean, this is sort
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  Speaker 1: of what's at stake here. Target was always thought to
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  Speaker 1: be the higher quality version, uh, and sort of tried
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  Speaker 1: to lure people who had a higher price point than
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  Speaker 1: say Walmart. But now Target appears to be putting Walmart
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  Speaker 1: and it's compete as as sort of like a competitor,
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  Speaker 1: or at least on that level. Is this is this
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  Speaker 1: strategy going to work for them? What they're doing isn't working.
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  Speaker 1: Lisa's as you Pam, your great producer, Sam Langon, I've
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  Speaker 1: discussed offline in the studio for for months. UH. Target
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  Speaker 1: has gone the wrong way, and also Targets probably the
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  Speaker 1: most vulnerable company to being organized by the ufc W,
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  Speaker 1: the Retail Clerks Union, UH, because even even the workers
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  Speaker 1: that want to take corrective action on the out of
• 5:08
  Speaker 1: stocks are disciplined and run off. We call it the
• 5:11
  Speaker 1: Volkman rule after Carl Volkman, who was fired for overriding
• 5:16
  Speaker 1: an inventory management system that wouldn't order product for product
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  Speaker 1: that was out of stock on the shelves, and the
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  Speaker 1: company decided in favor of the consultants and the constructive
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  Speaker 1: UH students who are highly rated in terms of productivity,
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  Speaker 1: wound up getting sacked in the stores. And UH. You know,
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  Speaker 1: for for all the problems that you and Pimm have
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  Speaker 1: presently pointed out, least in retail, all Targets problems are
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  Speaker 1: self inflicted. And Brian, Brian Cornell's got a got a
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  Speaker 1: few quarters to FIXTS. That's not totally fair because we
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  Speaker 1: also have this sort of elephant in the room, right,
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  Speaker 1: We've got Amazon. How much is this just Amazon creating
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  Speaker 1: a food fight among the rest of the brick and
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  Speaker 1: mortars Amazon on creating a food fight. Yes, Lisa. Yet
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  Speaker 1: yet at the same time, Target dot Com at uh
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  Speaker 1: stupidly outsourced Target dot Com fulfillment to Amazon for nearly
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  Speaker 1: a decade. So Target dot Com is way underdeveloped that
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  Speaker 1: areas growing quickly. But Target got complacent in basic apparel
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  Speaker 1: and fashion, especially for boys and girls and young women
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  Speaker 1: and men. And even uh, Target and Sears with lands
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  Speaker 1: and have better basic fashion as does Walmart for the
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  Speaker 1: first time in fifty years, and many key categories in apparel,
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  Speaker 1: and Uh that's self inflicted from Target. To Opportunity or
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  Speaker 1: stay away bird flicking show for all Chinese sign pim
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  Speaker 1: opportunity and danger. I'd bet on opportunity, okay, and as
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  Speaker 1: well as with the bonds too for Target. Uh, definitely
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  Speaker 1: with the bonds. I would bet against the bonds for Bergdorf, Neiman, Marcus,
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  Speaker 1: Grouper and MG. I would bet on the bonds for
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  Speaker 1: Target at divis are going to come in. Uh, the
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  Speaker 1: consultants are going to go out. You'll have better leadership,
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  Speaker 1: better business, better bond prices, better equity prices. Yeah, I'm
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  Speaker 1: looking at the Target two point nine percent bonds. Uh.
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  Speaker 1: There are a mirror one hundred and two point three
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  Speaker 1: cents on the dollar total discount. But this is an
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  Speaker 1: a UH and A minus rated company. This is a
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  Speaker 1: company that has a study revenue stream. So that's why
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  Speaker 1: you're saying they're going to be able to repay their debt.
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  Speaker 1: That's not the issue. Yeah, And this is also this
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  Speaker 1: is also a company that's neutralized Christmas hank quans and
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  Speaker 1: no merchandizing signs, no real good merchandizing activity. And as
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  Speaker 1: we've discussed, more vacuum cleaners in the ads in Christmas
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  Speaker 1: and hanak and quansa items during the key holiday selling period. UH,
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  Speaker 1: companies clearly gone the wrong way. And with a lot
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  Speaker 1: of merchants getting sacked and the consultants making the refreshed decisions,
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  Speaker 1: that that's a perscription UH for sick company getting sicker.
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  Speaker 1: But at least, as you and Tim said, it's fundamentally
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  Speaker 1: a strong company founded by the great Dayton family and
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  Speaker 1: there's still large shareholders in one way or the other
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  Speaker 1: in the honor of founder George Draper Dayton and the
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  Speaker 1: late Great Bruce Bliss Daton who passed away within the
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  Speaker 1: last year. UH. This this company will come back I'd
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  Speaker 1: be much more worried about nord uh than than I
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  Speaker 1: would be Target Uh. But Target Target we're gonna have
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  Speaker 1: to talk about. We're gonna you know, it's interesting you
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  Speaker 1: talk about North because we want to get your views
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  Speaker 1: on it. We're gonna have to leave that for another time.
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  Speaker 1: Because NORDSTN reported results recently and they exceeded analyst estimates.
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  Speaker 1: The stock moved higher. So I'm interested to hear what
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  Speaker 1: worked flicking share of Strategic Resource Group has to say
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  Speaker 1: about that. It's been yet another stellar by of months
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  Speaker 1: for US high yield bonds. Yields on the deck can
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  Speaker 1: no longer be considered high. They are low yield bonds
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  Speaker 1: at five point six percent, the lowest UH since two
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  Speaker 1: thousand fourteen. Has this market gone too far? I want
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  Speaker 1: to bring in Henry Peabody, co manager of the Eaton
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  Speaker 1: Vance Multisector bond Fund. He is the expert in all
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  Speaker 1: things fixed income. Henry, I'm so glad that you're here. Uh, Henry,
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  Speaker 1: what do you think? Do you think that the bond
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  Speaker 1: that the US hi yield bond market has gone too far?
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  Speaker 1: Probably has um thinking about yields in the mid fives,
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  Speaker 1: thinking about default rates, UM expected real returns, it's not
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  Speaker 1: too compelling. Fortunately, this is a market that active can
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  Speaker 1: do reasonably well in UM. For US, we see opportunities
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  Speaker 1: in US high yield UM. Not the broad market, but
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  Speaker 1: certainly a few UM. But spreading what well, you know,
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  Speaker 1: we're watching the retail sector fairly closely. UM. I can't
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  Speaker 1: say that we're UH diving in, but we're watching it
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  Speaker 1: fairly closely. So just to put this into perspective, a
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  Speaker 1: lot of people have been talking about a retailer recession,
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  Speaker 1: and we heard Bert Flickints share earlier on this program
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  Speaker 1: and analyst of the retail sector saying he thinks Nordstrums
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  Speaker 1: could potentially be in real trouble and that the bonds
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  Speaker 1: could be in real trouble. Do you agree, No, not necessarily, UM.
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  Speaker 1: We're still very early on in this process. UM. It's
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  Speaker 1: going to take a little while for this to settle out.
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  Speaker 1: You think about energy and you know, post OPAC Thanksgiving
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  Speaker 1: of a couple of years ago, and it takes off
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  Speaker 1: of us to shake out. So it's it's a slow
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  Speaker 1: moving process and one that you need to UM follow closely,
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  Speaker 1: establish starter positions UH and watches spreads evolve, but hard
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  Speaker 1: to make a distinct call on that credit per se today. Well,
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  Speaker 1: what would you be looking for? What are the characteristics?
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  Speaker 1: You know? I think you look for companies that have
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  Speaker 1: good online presence, UM, good uh footprints in good regions,
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  Speaker 1: with good product suites. But how about if you could
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  Speaker 1: just give me some number, like what kind of numbers
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  Speaker 1: are you looking for? You're looking for a certain amount
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  Speaker 1: of cash flow? Or because I mean all every company
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  Speaker 1: I know looks for exactly the things that you're describing.
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  Speaker 1: No one wants to be, you know, the old shoe.
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  Speaker 1: What what are the financial characteristics that you deem a
• 11:15
  Speaker 1: winner as opposed to someone you want to stay away from. Well,
• 11:18
  Speaker 1: I think that's going to evolve, and I think what
• 11:20
  Speaker 1: we look for in any position is a good liquidity runway.
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  Speaker 1: You need a company that can weather a challenging environment.
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  Speaker 1: You need liquidity, UM. You need assets that are will
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  Speaker 1: it that a company is willing to protect good assets UM.
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  Speaker 1: Potentially salable assets if those in the case of retail,
• 11:38
  Speaker 1: if that's a real estate UM. So you need a
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  Speaker 1: company with a relative mode from a competitive standpoint. But
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  Speaker 1: that's all gonna evolve over the next year or two.
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  Speaker 1: As this situation. Does you know, Henry and a lot
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  Speaker 1: of people talk about rich valuations in the higher bond market.
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  Speaker 1: I have to think about the Carlyles and the black
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  Speaker 1: Stones and the Kkrs of the worlds that have been
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  Speaker 1: seeing money for distress debt funds uh and have a
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  Speaker 1: record amount of dry powder on their books. Won't this
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  Speaker 1: prevent the higher bond market from falling too far? Or
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  Speaker 1: is it? Is it bad to read too much into
• 12:14
  Speaker 1: this sort of stash of cash. Well, you saw that
• 12:17
  Speaker 1: with energy, right, You saw a great deal of capital
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  Speaker 1: being raised in the private equity space for energy, and
• 12:23
  Speaker 1: there were fewer transactions because of that. Uh. You saw
• 12:26
  Speaker 1: that valuations between the band and the office side never
• 12:29
  Speaker 1: actually reached a clearing point. But by the same token,
• 12:32
  Speaker 1: you did see a great deal of capital availability. So
• 12:35
  Speaker 1: these companies were able to access the capital they need
• 12:38
  Speaker 1: and come around the other side. So does private equity
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  Speaker 1: put a floor underneath it at the margin? Yeah? Okay?
• 12:45
  Speaker 1: So um, what's eaten vances sort of base case scenario
• 12:48
  Speaker 1: for ten year treasuries for the end of the year. Well,
• 12:52
  Speaker 1: it's important to point out that we don't have a
• 12:54
  Speaker 1: top down view form from an economist personally then I
• 12:58
  Speaker 1: think you need to think about the tenure out as
• 13:01
  Speaker 1: a reflection of nominal growth. And so if you believe
• 13:04
  Speaker 1: that Trump is going to achieve nominal growth in the
• 13:08
  Speaker 1: four percent range, then you need to think about a
• 13:11
  Speaker 1: four pressure towards a four percent Okay, so if that happens,
• 13:14
  Speaker 1: if there is pressure towards a four percent ten year yield,
• 13:17
  Speaker 1: what would that do to HILD bonds. Well, you'd have
• 13:20
  Speaker 1: to My guess is with the front end of the
• 13:23
  Speaker 1: curve coming up at the same time, you would likely
• 13:26
  Speaker 1: see negative convexity. You'd see this market extend. You would
• 13:29
  Speaker 1: see HI yield extend away from being priced to call
• 13:33
  Speaker 1: and more to being priced to maturity. So you would
• 13:36
  Speaker 1: see uh duration extend performance be fairly soft. Um. That
• 13:41
  Speaker 1: would be in the context of better growth, which should
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  Speaker 1: see spreads contract, so other words, losses, but they'd be tempered. Yeah,
• 13:47
  Speaker 1: I think that's a fair fair assessment um in the
• 13:50
  Speaker 1: multi sector bond income fun right, Uh, what kind of
• 13:54
  Speaker 1: cash position are you holding right now? We're about seven
• 13:56
  Speaker 1: or eight percent today? Is that considered high? That's a
• 14:01
  Speaker 1: little higher than it has been, but we've been as
• 14:04
  Speaker 1: high as twenty UM in mid fourteen. We were, um,
• 14:08
  Speaker 1: when there was are you looking for reasons to get
• 14:11
  Speaker 1: into cash right now? Are you going after? I noticed
• 14:13
  Speaker 1: you've got Australian Queensland government bonds, you got bonds from Brazil, Canada,
• 14:17
  Speaker 1: and you do have a bunch of energy debt in
• 14:19
  Speaker 1: there as well. Sure we have. We still have some
• 14:22
  Speaker 1: legacy energy and materials positions that are doing very well.
• 14:24
  Speaker 1: But we've been looking more towards the e M side
• 14:27
  Speaker 1: over the past handful of months. Um. We think we've
• 14:31
  Speaker 1: owned Brazil for a while and that was a good
• 14:32
  Speaker 1: performer for us last year. But there's been some good
• 14:36
  Speaker 1: corporate issuance recently that, um, you know, we think offers
• 14:39
  Speaker 1: a good deal of return over the next handful of years.
• 14:42
  Speaker 1: We think that dollar strength is probably reaching uh high, Um,
• 14:47
  Speaker 1: you hope, So if that's going to get paid in
• 14:49
  Speaker 1: Canadian dollars. I was looking today one thirty two against
• 14:52
  Speaker 1: the Luna dollar strengthening. Yeah, the dollar has been strong,
• 14:55
  Speaker 1: but our non dollar positions have actually benefited us this year. Um.
• 15:00
  Speaker 1: Aller has rolled over against most major currencies since the
• 15:03
  Speaker 1: beginning of the year. We had that rally post election
• 15:05
  Speaker 1: in a fade since then, all right, I want to
• 15:08
  Speaker 1: thank you very much for coming in and spending time
• 15:09
  Speaker 1: with us. Henry Peabody as co manager of the Eaton
• 15:12
  Speaker 1: Vance Multisector Bond Fund. P and L is brought to
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• 15:53
  Speaker 1: cloth dot com Custom shirts made Smarter. There was a
• 16:04
  Speaker 1: great scroup that came out overnight by Bloomberg News is
• 16:08
  Speaker 1: Laura Keller along with a couple of her colleagues talking
• 16:11
  Speaker 1: about how c l s A, the brokerage which is
• 16:13
  Speaker 1: owned by China Citic Securities, dismissed ninety US based employees
• 16:18
  Speaker 1: on Monday. This is basically them closing their US equity
• 16:21
  Speaker 1: research team and for more, I want to bring in Laura,
• 16:25
  Speaker 1: who joins us now in our Bloomberg eleven three, Oh, studio, Laura,
• 16:28
  Speaker 1: First of all, just sort of give us a sense
• 16:31
  Speaker 1: how long has c L s A been in the
• 16:34
  Speaker 1: business of US equity research and how big of a
• 16:36
  Speaker 1: departure is this for them? Right, So, Lisa, they've been
• 16:40
  Speaker 1: here since about two thousand nine, so it's definitely some
• 16:43
  Speaker 1: franchise that's been here for a while. When is that
• 16:45
  Speaker 1: eight years? Um? And they're I mean, they're not small,
• 16:48
  Speaker 1: but they're not one of our huge, sort of bold brackets.
• 16:50
  Speaker 1: Of course. So they had about um, I guess it
• 16:53
  Speaker 1: would be around a hundred sixty people in the US.
• 16:56
  Speaker 1: Were some very well known ones, yes, very well known.
• 16:59
  Speaker 1: Mike Mayo is really sort of their star guy. Um.
• 17:02
  Speaker 1: They also had um some tech analysts as well, obvious
• 17:05
  Speaker 1: Silver and McGuire we mentioned in our story. And Mike
• 17:08
  Speaker 1: Mayo of course being this very prominent, very outspoken bank analyst.
• 17:13
  Speaker 1: Today he's at the JP Morgan conference. He he actually
• 17:16
  Speaker 1: called himself a free agent, um, since he's not working
• 17:18
  Speaker 1: at c L s A anymore, and he was dismissed
• 17:20
  Speaker 1: along with ninety others um as you mentioned, h late
• 17:24
  Speaker 1: in the day, we understand called into a meeting around
• 17:27
  Speaker 1: four fifteen aftermarket clothes and let let known that they
• 17:30
  Speaker 1: would be no longer working there. UM. And we have
• 17:33
  Speaker 1: this image as well, uh and our story of Mike
• 17:36
  Speaker 1: Mayo walking home with this box um of things, you know,
• 17:39
  Speaker 1: presumably from his his desk in his office there. Can
• 17:43
  Speaker 1: you explain why did c ls A decide to do this? So,
• 17:47
  Speaker 1: I mean c ls A has had a lot of
• 17:49
  Speaker 1: trouble with this um Us business, but also with their
• 17:52
  Speaker 1: equities brokerage. I mean they were bought UM by a
• 17:55
  Speaker 1: Chinese firm, Civic Securities in two thousand, goes all the
• 17:59
  Speaker 1: way back to Creditly right, yes, and they bought it
• 18:01
  Speaker 1: from that French bank UM. So they actually had tried
• 18:04
  Speaker 1: to sell um CIDEC had tried to sell these guys
• 18:08
  Speaker 1: and they weren't I guess presumably able to find a buyer.
• 18:12
  Speaker 1: So they've had some trouble since. Back then. You know,
• 18:14
  Speaker 1: we had reported UM. One of our Asian colleagues, I
• 18:17
  Speaker 1: think it was Kathy Chan in UM September reported that
• 18:20
  Speaker 1: the bank actually pulled this sort of it's a very
• 18:23
  Speaker 1: unusual thing where they asked people to voluntarily take unpaid
• 18:27
  Speaker 1: vacations of up to ten days and that's they were
• 18:30
  Speaker 1: just trying to save money, and this is something that
• 18:32
  Speaker 1: they have done three other times when they've gotten in trouble.
• 18:35
  Speaker 1: But I mean that's a very unusual measure, UM, and
• 18:38
  Speaker 1: really not something you do unless you're having a lot
• 18:41
  Speaker 1: of issues on the revenue side and even on the
• 18:43
  Speaker 1: cost side. Well, but c LA say, this might be
• 18:46
  Speaker 1: an idiosyncratic issue, but it does sort of come at
• 18:49
  Speaker 1: a time when on a broader level, research firms across
• 18:53
  Speaker 1: or research units I should say across Wall Street have
• 18:56
  Speaker 1: been cut significantly. And part of this has to do
• 18:59
  Speaker 1: with new rules that are going to go into effect
• 19:02
  Speaker 1: the third of January in two thousand eighteen that require
• 19:07
  Speaker 1: banks to charge investment firms for any research they provide them.
• 19:12
  Speaker 1: I mean, does this play into c LSA's decision at all? UM,
• 19:17
  Speaker 1: I don't think, Lisa from According to the CEO that UM,
• 19:20
  Speaker 1: Jonathan Sloan UM Kathy Chan had talked with him and
• 19:24
  Speaker 1: he said, no, this is not a result of those rules,
• 19:27
  Speaker 1: those my fed roles that you were talking about, UM,
• 19:30
  Speaker 1: this has nothing to do with those. What he said
• 19:32
  Speaker 1: was that they want to really just you know, have
• 19:36
  Speaker 1: execution only framework in the US. That's what he said, UM,
• 19:40
  Speaker 1: And and really focus on those parts of the business.
• 19:42
  Speaker 1: Nothing to do with these new rules, although I will say,
• 19:44
  Speaker 1: I mean, just on a broader level of competition for
• 19:47
  Speaker 1: research has been amped up in a pretty dramatic way,
• 19:50
  Speaker 1: with the worth of it being called into question. There
• 19:53
  Speaker 1: was a Financial Times article that came out over the
• 19:56
  Speaker 1: weekend talking about how different firms are bandying about what
• 19:59
  Speaker 1: the costs scheme will be for this type of research,
• 20:02
  Speaker 1: with some banks proposing ten thousand dollars a phone call
• 20:05
  Speaker 1: for with for for a chance to talk with their
• 20:09
  Speaker 1: senior analysts, um and and basically investment firms saying no way.
• 20:13
  Speaker 1: So it's a huge departure from every which way that
• 20:18
  Speaker 1: they normally have conducted business. I mean, normally you have
• 20:20
  Speaker 1: a big investor who can just call his his you know,
• 20:24
  Speaker 1: his sales up, yes, but also his equity analyst and
• 20:28
  Speaker 1: talk about ideas. You know, if he's I've even heard too.
• 20:31
  Speaker 1: You know, if you're a dead investor, but you want
• 20:33
  Speaker 1: to talk a little bit on equities, you copy your
• 20:35
  Speaker 1: your debt representative, maybe the analysts on that side, and
• 20:38
  Speaker 1: he can bring in the conversation for you a sell
• 20:41
  Speaker 1: side person on the equity side. So it's a charge
• 20:43
  Speaker 1: for that conversation. I mean, I'm just not sure what
• 20:46
  Speaker 1: kind of mechanism you start to get into. And I
• 20:48
  Speaker 1: mean it's almost like billable hours for lawyers or something.
• 20:51
  Speaker 1: Certainly seems that way. Thank you very much, Laura Keller,
• 20:55
  Speaker 1: financial reporter for Bloomberg. You've been keeping us up to
• 20:58
  Speaker 1: date on this story and of course the ongoing changes
• 21:01
  Speaker 1: to equity research. Before I buy any mobile device, I
• 21:17
  Speaker 1: check in with one person, John Butler. He's our senior
• 21:20
  Speaker 1: Telecom Services and Equipment analyst for Bloomberg Intelligence. He provides
• 21:24
  Speaker 1: unique and real time research for the telecoms industry, and
• 21:29
  Speaker 1: he's here in the studio joining us. Now. Thanks very much.
• 21:33
  Speaker 1: Well that's great, Gray of different phones in front of him. Well,
• 21:37
  Speaker 1: he wishes, he wish he's getting as many as pim. Right. Well,
• 21:40
  Speaker 1: I'm not gonna go there. That's not let's not talk
• 21:42
  Speaker 1: about those problems. UM, I want you to talk about
• 21:45
  Speaker 1: Mobile World Congress taking place in Barcelona. You say it's
• 21:48
  Speaker 1: a zoo you go to CS Consumer Electronics show in
• 21:51
  Speaker 1: Las Vegas. Uh. I was reading the reports from Barcelona,
• 21:56
  Speaker 1: and I thought that Nokia was the one that grabbed
• 21:59
  Speaker 1: the head lines for something that I frankly did not
• 22:02
  Speaker 1: expect they really did. They're not even making handsets anymore.
• 22:06
  Speaker 1: They actually have a partnership with HMD, which is a
• 22:12
  Speaker 1: longtime partner there is, and they're manufacturing the phone and
• 22:15
  Speaker 1: licensing the brand. And they came out with the old
• 22:19
  Speaker 1: candy bar that the thirty three ten has been updated,
• 22:23
  Speaker 1: complete with the popular game Snake if you remember that
• 22:27
  Speaker 1: one from back in two thousand is when that was
• 22:30
  Speaker 1: originally launched. Yes, and it sold over a hundred and
• 22:34
  Speaker 1: twenty five million units, which back then was really a
• 22:37
  Speaker 1: big deal. So it was a huge hit. Everyone who
• 22:40
  Speaker 1: had had wireless service at that point at least considered
• 22:44
  Speaker 1: buying one if they didn't known one. So the Nokia
• 22:48
  Speaker 1: thirty three ten is back, it's updated, it's got a
• 22:51
  Speaker 1: color screen. But it's why you think I can I
• 22:58
  Speaker 1: think people are you know, if you look at even
• 23:01
  Speaker 1: TV these days, a lot of there's a lot of
• 23:03
  Speaker 1: retro stuff showing up, and I think it's sort of
• 23:05
  Speaker 1: playing into that trend. But I for Nokia, I really
• 23:09
  Speaker 1: think it's about reminding people that the brand is back,
• 23:12
  Speaker 1: so they I mean, this is not a smartphone. No,
• 23:19
  Speaker 1: I actually I don't know what the price is they
• 23:22
  Speaker 1: say it's going to be something under like it'll be
• 23:26
  Speaker 1: it'll be two digits, not three. I'm certain of that.
• 23:30
  Speaker 1: Um And they launched the Nokia three, five, and six
• 23:34
  Speaker 1: along with it, which are very moderately priced smartphones, and
• 23:39
  Speaker 1: I think that's where they should play. The brand is
• 23:41
  Speaker 1: very popular, for example, in India, it's a huge brand there.
• 23:45
  Speaker 1: So coming out with a reminder of hey, we're back, uh,
• 23:50
  Speaker 1: you know, sort of welling up those warm memories of
• 23:53
  Speaker 1: the Nokia brand with the three tum But let's a
• 24:00
  Speaker 1: little bit about Apple, because they're going to be having
• 24:02
  Speaker 1: their investor meet egg and we just found out about
• 24:07
  Speaker 1: Warren Buffett's newfound love of Apple and his newfound share
• 24:12
  Speaker 1: or ownership of Apple has increased. Do you expect that
• 24:15
  Speaker 1: to be something that Apple is talked is asked about,
• 24:18
  Speaker 1: or even volunteers. You know, they may talk about the
• 24:22
  Speaker 1: fact that team really is a big year for Apple.
• 24:25
  Speaker 1: It's an anniversary year for the iPhone. What tends to
• 24:30
  Speaker 1: spark upgrades in the in smartphones in general, something really
• 24:35
  Speaker 1: an innovative new feature. So we saw it with the
• 24:37
  Speaker 1: iPhone sex for example, the first large screen iPhone, and
• 24:41
  Speaker 1: that generated what can best be described as sort of
• 24:45
  Speaker 1: a sales super cycle, and I think the hope is
• 24:48
  Speaker 1: building that this year we're going to see a move
• 24:51
  Speaker 1: to a brighter screen technology called oh Lead, and we're
• 24:55
  Speaker 1: going to see true waterproofing with the iPhone and a
• 24:59
  Speaker 1: better on the front and the back. So there's a
• 25:02
  Speaker 1: lot that's being talked about. Uh, they have room to innovate,
• 25:06
  Speaker 1: and um, you know, I think it could really be
• 25:09
  Speaker 1: a big year for them, So fingers crossed, and I
• 25:13
  Speaker 1: think that will come up in the shareholders meeting. I
• 25:15
  Speaker 1: think they're going to figure out how to get those
• 25:17
  Speaker 1: Year buds made in scale so that people can actually
• 25:20
  Speaker 1: listen to the phone with I'll happen to be use
• 25:22
  Speaker 1: an adapter because they got rid of the uh you know,
• 25:25
  Speaker 1: the imp the sound output, the air phone jack. Yeah.
• 25:29
  Speaker 1: That actually, of all decisions they've made over the years,
• 25:33
  Speaker 1: that one really lets my head. Yeah, I don't get it.
• 25:37
  Speaker 1: And um, you know, the move to wireless technology and
• 25:42
  Speaker 1: headphones and other accessories is definitely a trend that's in place,
• 25:46
  Speaker 1: but it's not really mature enough at this point in
• 25:49
  Speaker 1: my mind to have done away with the Year phone jack.
• 25:52
  Speaker 1: But it is gone on the iPhone, seven, and uh,
• 25:56
  Speaker 1: you know, my hope is that they come out with
• 25:59
  Speaker 1: lower cost alternatives than those wireless ear buds, which are
• 26:03
  Speaker 1: a hundred. What I was very excited about hearing is
• 26:07
  Speaker 1: that Apple may cut the charging chord completely with the
• 26:10
  Speaker 1: iPhone eight. That's the rumor sort of circulating right now, right, Yeah, yeah,
• 26:14
  Speaker 1: there are better than the earbuds, I mean wireless technology,
• 26:18
  Speaker 1: charging technology. It's I mean one of these new things,
• 26:22
  Speaker 1: you know, they always come with with some downside. Just quickly, John,
• 26:26
  Speaker 1: I just went back. We got to go back to
• 26:27
  Speaker 1: this Nokia thing because I found out it's about fifty
• 26:29
  Speaker 1: two bucks for the Nocchia thirty three ten. Now it's
• 26:35
  Speaker 1: twenty two hours talk time a month long on standby,
• 26:38
  Speaker 1: available in warm red, yellow gloss finished dark blue, and gray,
• 26:42
  Speaker 1: both with Matt finish, and it supports two point five
• 26:46
  Speaker 1: G network technology, which is ancient technology. But my point is,
• 26:50
  Speaker 1: how many people you think are going to buy this
• 26:52
  Speaker 1: as a fashion access for I mean, this is almost
• 26:54
  Speaker 1: disposable at fifty two bucks. Yeah, I actually that's a
• 26:59
  Speaker 1: good question. But I think they're really aiming for emerging markets,
• 27:02
  Speaker 1: to be honest. Yeah, India, Well, hm d Ye, thanks
• 27:06
  Speaker 1: for well, we'll be, we'll be, we'll be heeping tabs
• 27:08
  Speaker 1: on him's budding career as a an advocate for the
• 27:12
  Speaker 1: Nokia Phones. John Butler, thank you so much for joining us.
• 27:15
  Speaker 1: Always a pleasure of senior telecom services and equipment analysts
• 27:19
  Speaker 1: talking about Apple's annual shareholder meeting and also uh the
• 27:22
  Speaker 1: Mobile World Congress with Nokia's new phone. Thanks for listening
• 27:33
  Speaker 1: to the Bloomberg P and L podcast. You can subscribe
• 27:36
  Speaker 1: and listen to interviews at iTunes, SoundCloud, or whatever podcast
• 27:40
  Speaker 1: platform you prefer. I'm pim Fox. I'm out there on
• 27:43
  Speaker 1: Twitter at pim Fox. I'm out there on Twitter at
• 27:47
  Speaker 1: Lisa Abramo. It's one before the podcast. You can always
• 27:50
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