1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:31,760 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. If 7 00:00:31,800 --> 00:00:35,440 Speaker 1: you blink, you will probably miss the direction of stock markets. 8 00:00:35,479 --> 00:00:38,800 Speaker 1: They are whipping around. Uh, they were down, then they 9 00:00:38,840 --> 00:00:41,760 Speaker 1: were up as much as a percent on the Nasdaq, 10 00:00:41,840 --> 00:00:44,600 Speaker 1: which has been leading the losses and the gains, and 11 00:00:44,720 --> 00:00:48,479 Speaker 1: now they're up solidly but way off that NAZAC up 12 00:00:48,520 --> 00:00:52,400 Speaker 1: to tents of two tenths of a percent joining us now. 13 00:00:52,479 --> 00:00:55,520 Speaker 1: Matt Malee, equity strategist for Miller, ty Back and Company, 14 00:00:56,280 --> 00:00:59,320 Speaker 1: joining us, Mad, how do you interpret the whippy action 15 00:00:59,360 --> 00:01:03,040 Speaker 1: that we've seen, Uh, that really has marked every day 16 00:01:03,120 --> 00:01:05,640 Speaker 1: over the past few weeks. After the past few weeks, 17 00:01:05,640 --> 00:01:09,560 Speaker 1: excuse me, it feels like a Friday. Yeah, it's it's well, 18 00:01:09,640 --> 00:01:13,240 Speaker 1: yesterday's it was. It was particularly worrisome because a lot 19 00:01:13,280 --> 00:01:16,120 Speaker 1: of these big swings we've seen have been kind of 20 00:01:16,120 --> 00:01:18,640 Speaker 1: one directional. We do in other words, well, say two directional. 21 00:01:18,680 --> 00:01:21,120 Speaker 1: In other words, the first direction is in the morning 22 00:01:21,120 --> 00:01:24,039 Speaker 1: we either open up very strongly or open down very strongly, 23 00:01:24,319 --> 00:01:26,880 Speaker 1: and then uh, and then we move in the other direction, 24 00:01:26,920 --> 00:01:29,520 Speaker 1: So that's kind of a second move. Yesterday we actually 25 00:01:29,560 --> 00:01:32,000 Speaker 1: had three moves and uh. I think that you know, 26 00:01:32,080 --> 00:01:35,440 Speaker 1: that does nothing but making people more uncertain. And as 27 00:01:35,440 --> 00:01:37,000 Speaker 1: we all know, I mean, it's an old cliche, but 28 00:01:37,000 --> 00:01:39,479 Speaker 1: it's very very true. There's nothing worse for the markets. 29 00:01:40,280 --> 00:01:43,240 Speaker 1: The markets hate nothing more than uncertainty. And I think 30 00:01:43,280 --> 00:01:46,320 Speaker 1: this has got people stepping back from this rally this morning. 31 00:01:46,360 --> 00:01:47,960 Speaker 1: I mean, it's still holding up a little bit, but 32 00:01:48,320 --> 00:01:50,760 Speaker 1: we're well off our highs on the day. Matt Malie, 33 00:01:50,920 --> 00:01:54,080 Speaker 1: in your experience, is it possible to know how many 34 00:01:54,160 --> 00:01:57,200 Speaker 1: shares of a particular stock need to be traded in 35 00:01:57,320 --> 00:02:00,400 Speaker 1: order to move that said stock in one d direction 36 00:02:00,640 --> 00:02:04,560 Speaker 1: or another. I'm sure there's been many studies on it, 37 00:02:04,600 --> 00:02:07,000 Speaker 1: but for exact numbers that I'm not aware of it. Okay. 38 00:02:07,040 --> 00:02:09,519 Speaker 1: The reason I bring that up is because hardly anyone 39 00:02:10,200 --> 00:02:13,240 Speaker 1: has that information. I've never met anybody who can tell 40 00:02:13,280 --> 00:02:17,560 Speaker 1: precisely what kind of volume is necessary in order to 41 00:02:17,639 --> 00:02:19,680 Speaker 1: move his stock, and the reason I posed this to 42 00:02:19,720 --> 00:02:23,760 Speaker 1: you is because the prices are determined not by long 43 00:02:23,880 --> 00:02:28,640 Speaker 1: term shareholders who may not ever touch their positions. But 44 00:02:29,360 --> 00:02:33,400 Speaker 1: I'm wondering who determines the price that we see on 45 00:02:33,440 --> 00:02:36,880 Speaker 1: a daily basis, not on a long term basis, but 46 00:02:37,000 --> 00:02:41,399 Speaker 1: on this volatile trading basis. Well, I'm afraid nowadays, of course, 47 00:02:41,440 --> 00:02:44,400 Speaker 1: and more than more than ever, it's these uh you know, 48 00:02:44,440 --> 00:02:47,120 Speaker 1: it's the mechanics trading. And we all talk about algalis 49 00:02:47,160 --> 00:02:50,160 Speaker 1: and high frequency traders and such. We've been talking about 50 00:02:50,160 --> 00:02:52,440 Speaker 1: it for years, but there's no questions they play a 51 00:02:52,480 --> 00:02:55,720 Speaker 1: big role. And and the thing is in in in 52 00:02:55,960 --> 00:02:58,280 Speaker 1: former days when you didn't have such a you know, 53 00:02:58,320 --> 00:03:00,200 Speaker 1: there was been recognized trading around for a while. But 54 00:03:00,280 --> 00:03:02,880 Speaker 1: with these algorithms that they're just kicking immediately. But not 55 00:03:02,919 --> 00:03:05,960 Speaker 1: only do they add by orders when the when the 56 00:03:05,960 --> 00:03:08,800 Speaker 1: market's going up, but they cancel sell orders and they 57 00:03:08,800 --> 00:03:11,120 Speaker 1: cancel offerings in the same one in the opposite direction, 58 00:03:11,360 --> 00:03:14,000 Speaker 1: when they add sell orders, they cancel their bids. And 59 00:03:14,040 --> 00:03:16,640 Speaker 1: this exacerbates the big swings that we have in the marketplace, 60 00:03:16,840 --> 00:03:19,560 Speaker 1: and it makes it for much harder for for us 61 00:03:19,600 --> 00:03:22,280 Speaker 1: to regain our you know, kind of the UH investor 62 00:03:22,320 --> 00:03:23,920 Speaker 1: confidence that we need to get, you know, to form 63 00:03:24,000 --> 00:03:26,679 Speaker 1: an exactly a kind of the bottom for this h 64 00:03:26,760 --> 00:03:29,880 Speaker 1: this sell off. So given that confusion, can you read 65 00:03:30,000 --> 00:03:32,240 Speaker 1: anything into this? I know that you have a lot 66 00:03:32,240 --> 00:03:35,160 Speaker 1: of specialty looking at technical analysis and sort of watching 67 00:03:35,160 --> 00:03:37,920 Speaker 1: the markets and the patterns. Me are you gleaning anything 68 00:03:38,120 --> 00:03:39,760 Speaker 1: or is it sort of all over the place because 69 00:03:39,800 --> 00:03:43,440 Speaker 1: of this of the noise? Well? No, actually, you know 70 00:03:43,440 --> 00:03:45,680 Speaker 1: we are seeing some things now, I mean the showing 71 00:03:45,720 --> 00:03:48,440 Speaker 1: that we I think we're getting somewhat close to a 72 00:03:48,480 --> 00:03:51,320 Speaker 1: bottom the problem whenever we have in terms of time, 73 00:03:51,680 --> 00:03:53,240 Speaker 1: I think that we you know, we're starting to see 74 00:03:53,280 --> 00:03:55,320 Speaker 1: a big pickup in volume. We're seeing some of the 75 00:03:55,960 --> 00:03:59,800 Speaker 1: major groups I'm sorry, the major average is being oversold, 76 00:04:00,080 --> 00:04:02,360 Speaker 1: maybe not yet to the quite the big extremes we 77 00:04:02,480 --> 00:04:05,600 Speaker 1: usually see, but still getting very close to that. We're 78 00:04:05,600 --> 00:04:08,080 Speaker 1: also seeing um sentiment. I mean, I look at the 79 00:04:08,120 --> 00:04:11,320 Speaker 1: daily Sentiment index which measures futures traders. It's only ten 80 00:04:11,360 --> 00:04:14,920 Speaker 1: percent bulls right now, that's quite a quite extremely sometimes 81 00:04:14,920 --> 00:04:16,560 Speaker 1: you usually seem to need to see it fall into 82 00:04:16,600 --> 00:04:18,839 Speaker 1: the single digits, but we're getting very close to that. 83 00:04:18,920 --> 00:04:22,240 Speaker 1: So the problem is with these mechanized tradings going on, 84 00:04:22,440 --> 00:04:24,400 Speaker 1: you could see a big another down, draft, another down 85 00:04:24,520 --> 00:04:27,040 Speaker 1: five percent or more over a couple of days before 86 00:04:27,040 --> 00:04:29,479 Speaker 1: we get that bottom um. But the thing I like 87 00:04:29,600 --> 00:04:31,440 Speaker 1: the most right now is what we're seeing in some 88 00:04:31,480 --> 00:04:34,000 Speaker 1: of the really beaten down groups, like the housing stocks 89 00:04:34,040 --> 00:04:38,760 Speaker 1: and the um bank stocks. They've gotten so oversold that 90 00:04:38,839 --> 00:04:40,760 Speaker 1: they're really getting to a level they should be bought. 91 00:04:40,800 --> 00:04:43,159 Speaker 1: I believe number one and number two this week they've 92 00:04:43,160 --> 00:04:45,200 Speaker 1: outperformed the rest of the market, so they're holding up 93 00:04:45,279 --> 00:04:47,840 Speaker 1: much better than the rest of the market. Shows that 94 00:04:47,920 --> 00:04:49,719 Speaker 1: at least they're getting washed out. So I think the 95 00:04:49,760 --> 00:04:51,200 Speaker 1: rest of the market is getting very close to being 96 00:04:51,200 --> 00:04:53,760 Speaker 1: washed out as well. Matt. Maybe I just want you 97 00:04:53,800 --> 00:04:56,720 Speaker 1: to offer a little bit more detail into the technical 98 00:04:56,880 --> 00:05:01,200 Speaker 1: aspects of trading, in the sense that sell orders can 99 00:05:01,320 --> 00:05:04,480 Speaker 1: be canceled because you might put out a bid there 100 00:05:04,800 --> 00:05:07,920 Speaker 1: to sell a large block of stock, and by the 101 00:05:07,920 --> 00:05:11,600 Speaker 1: time you get back any information about what's available at 102 00:05:11,600 --> 00:05:15,120 Speaker 1: a particular price, you can then cancel that order, which is, 103 00:05:15,160 --> 00:05:20,479 Speaker 1: as you say, would accentuate changes in volatility exactly. They 104 00:05:20,520 --> 00:05:23,800 Speaker 1: they again these these uh the way these things are 105 00:05:23,800 --> 00:05:26,000 Speaker 1: set up in in in fractions of a section, so 106 00:05:26,240 --> 00:05:28,680 Speaker 1: and I mean real fraction tiny when millions of it, 107 00:05:28,800 --> 00:05:31,360 Speaker 1: well one thousands of of a second. Uh, these orders 108 00:05:31,400 --> 00:05:33,400 Speaker 1: can be canceled. You think you've got a bid to hit, 109 00:05:33,720 --> 00:05:35,039 Speaker 1: in other words, that you can sell it at a 110 00:05:35,040 --> 00:05:36,760 Speaker 1: certain price. When you go down to sell it, it's 111 00:05:36,760 --> 00:05:39,159 Speaker 1: not there. Uh. And then suddenly you're selling at a 112 00:05:39,160 --> 00:05:41,520 Speaker 1: lower price. And if you put a market order in 113 00:05:41,560 --> 00:05:44,359 Speaker 1: and then suddenly you're you're hitting. Instead of sending a 114 00:05:44,400 --> 00:05:46,320 Speaker 1: lot of one price, you sold just very little there, 115 00:05:46,360 --> 00:05:48,479 Speaker 1: and then you sell the stock down, so it's it 116 00:05:48,520 --> 00:05:51,960 Speaker 1: gets overdone. I'll tell you though, if we get another downdraft, 117 00:05:52,080 --> 00:05:54,120 Speaker 1: I believe the best way to play it is not 118 00:05:54,200 --> 00:05:56,800 Speaker 1: trying to pick the bottom. But while I call align 119 00:05:56,880 --> 00:05:58,600 Speaker 1: the book. In other words, if you want to buy 120 00:05:59,520 --> 00:06:02,320 Speaker 1: a foul dollars with a stock by two at one level, 121 00:06:02,440 --> 00:06:05,080 Speaker 1: then by another two hundred down half of a dollar 122 00:06:05,120 --> 00:06:07,159 Speaker 1: below that, and below that, blow that line it all 123 00:06:07,200 --> 00:06:08,880 Speaker 1: the way down. You're never gonna be able to pick 124 00:06:08,920 --> 00:06:10,960 Speaker 1: the bottom. But that way your average price will be 125 00:06:11,000 --> 00:06:13,880 Speaker 1: actually quite good and you won't be sitting there trying 126 00:06:13,920 --> 00:06:15,880 Speaker 1: to chase things around when all this mechanized trading is 127 00:06:15,880 --> 00:06:17,400 Speaker 1: going on. Matt, what do you think is driving the 128 00:06:17,480 --> 00:06:21,400 Speaker 1: sell off. Well, I think you know, it's threefold. Number 129 00:06:21,440 --> 00:06:25,440 Speaker 1: one is the the Federal Reserve u uh sticking by 130 00:06:25,480 --> 00:06:28,440 Speaker 1: their guns and saying that they're going to continue to tighten. Um. 131 00:06:28,480 --> 00:06:30,039 Speaker 1: And the one thing is that they've been tightening for 132 00:06:30,080 --> 00:06:33,279 Speaker 1: two years now, almost two years anyway, and and that's 133 00:06:33,279 --> 00:06:35,679 Speaker 1: what happens. That usually takes usually a big lad between 134 00:06:35,680 --> 00:06:37,480 Speaker 1: when they start tightening when it has an impact on 135 00:06:37,520 --> 00:06:39,960 Speaker 1: the stock market. Now. The same thing as is true 136 00:06:40,080 --> 00:06:45,359 Speaker 1: uh on the these um things with trade issues with China. 137 00:06:45,640 --> 00:06:47,159 Speaker 1: I mean, it was a lot of talk, but once 138 00:06:47,240 --> 00:06:50,560 Speaker 1: these trade I'm sorry, these terrorists were actually imposed, that's 139 00:06:50,560 --> 00:06:52,480 Speaker 1: when it's starting having the impact. And it is having 140 00:06:52,480 --> 00:06:55,760 Speaker 1: an impact as we're seeing on at least not earnings 141 00:06:55,839 --> 00:06:58,400 Speaker 1: right now, but on earnings guidance, and that's a big concern. 142 00:06:58,680 --> 00:07:00,279 Speaker 1: And the last thing, of course, I think is Europe 143 00:07:00,279 --> 00:07:02,200 Speaker 1: with this thing is Italy. The people. You know, we've 144 00:07:02,200 --> 00:07:05,239 Speaker 1: seen the European banks fall well into the bear market 145 00:07:05,320 --> 00:07:08,279 Speaker 1: territory before and our markets started to decline. It's something 146 00:07:08,320 --> 00:07:10,360 Speaker 1: people were ignoring and not paying enough attention to. So 147 00:07:10,520 --> 00:07:13,600 Speaker 1: it's kind of three three pronged thing here. Um. But uh, 148 00:07:14,160 --> 00:07:17,360 Speaker 1: you know, it's it's the economy is still fine. I think, Well, 149 00:07:17,560 --> 00:07:19,720 Speaker 1: this correction is healthy and normal. It could be a 150 00:07:19,760 --> 00:07:22,080 Speaker 1: little bit deeper, actually, could be even go down another 151 00:07:22,120 --> 00:07:23,680 Speaker 1: you know, like I said, five or six or seven 152 00:07:23,680 --> 00:07:26,600 Speaker 1: percent more, But uh, we don't want things to go 153 00:07:26,680 --> 00:07:29,240 Speaker 1: up on a straight line. This is actually healthy and 154 00:07:29,480 --> 00:07:33,920 Speaker 1: h I wouldn't um, I wouldn't get overly concerned. It's scary, 155 00:07:33,960 --> 00:07:37,400 Speaker 1: but that's that's the way it works. Thanks very much 156 00:07:37,440 --> 00:07:41,120 Speaker 1: for being with us. Matt Malee is the chief equity 157 00:07:41,200 --> 00:07:44,920 Speaker 1: strategist for Miller, tay Back and Company, and it sounds 158 00:07:44,920 --> 00:07:48,920 Speaker 1: as though he's bullish, at least on the price action. 159 00:07:49,480 --> 00:07:51,640 Speaker 1: I mean, this price action is mind boggling. Now we're 160 00:07:51,680 --> 00:07:54,400 Speaker 1: back down to barely any gain at all on the NASDAC. 161 00:07:54,480 --> 00:07:56,760 Speaker 1: I mean, things have absolutely been swinging all over the 162 00:07:56,760 --> 00:07:59,360 Speaker 1: place h today, and they have been over the past 163 00:07:59,400 --> 00:08:03,000 Speaker 1: few days. That certainly undermines confidence in and of itself. Yeah, 164 00:08:03,040 --> 00:08:05,440 Speaker 1: and you've got this sell off well. I mean, even 165 00:08:05,440 --> 00:08:08,080 Speaker 1: though the SMP fire is higher by a little bit 166 00:08:08,080 --> 00:08:10,600 Speaker 1: more than six and a half points, it is off 167 00:08:10,680 --> 00:08:13,440 Speaker 1: its highs of the day, and we are almost doing 168 00:08:13,480 --> 00:08:29,720 Speaker 1: a round turn to where the market opened. General Electric 169 00:08:29,760 --> 00:08:32,760 Speaker 1: has been a source SPoD for equity markets for a 170 00:08:32,840 --> 00:08:35,640 Speaker 1: long time, and today it almost looked like they were 171 00:08:35,679 --> 00:08:38,840 Speaker 1: ripping the band aid off. And then regulator, as it 172 00:08:38,880 --> 00:08:42,200 Speaker 1: turns out, are looking into the company Brooks Otherland Bloomberg 173 00:08:42,240 --> 00:08:45,480 Speaker 1: opinion columnists covering all things industrials choices. Now, so what's 174 00:08:45,520 --> 00:08:48,959 Speaker 1: going on here and why can't she just catch a break? 175 00:08:49,600 --> 00:08:51,880 Speaker 1: There are a couple of different things going on here. Um, 176 00:08:51,920 --> 00:08:54,800 Speaker 1: so you know you reference regulators what they said on 177 00:08:54,920 --> 00:08:59,240 Speaker 1: the conference callege the SEC is expanding its investigation into 178 00:08:59,320 --> 00:09:02,600 Speaker 1: the companies that counting practices to include this twenty two 179 00:09:02,640 --> 00:09:05,680 Speaker 1: billion good will charge that they booked in their power unit. Now, 180 00:09:05,720 --> 00:09:08,880 Speaker 1: the SEC started this investigation after g E said in 181 00:09:08,960 --> 00:09:11,560 Speaker 1: January that it was going to have a fifteen billion 182 00:09:11,679 --> 00:09:15,680 Speaker 1: reserve shortfall related to a legacy insurance business. So to me, 183 00:09:16,120 --> 00:09:18,559 Speaker 1: it's not terribly surprising that the SEC is going to 184 00:09:18,600 --> 00:09:21,040 Speaker 1: look at this good will charge because it's basically the 185 00:09:21,120 --> 00:09:24,840 Speaker 1: same issue. So the insurance business GE reviewed that every 186 00:09:24,880 --> 00:09:27,280 Speaker 1: single year. So then all of a sudden come out 187 00:09:27,320 --> 00:09:30,360 Speaker 1: with a fifteen billion dollar shortfall. I think raised a 188 00:09:30,440 --> 00:09:33,960 Speaker 1: lot of questions about the credibility of their internal controls. 189 00:09:34,040 --> 00:09:35,840 Speaker 1: It's the same issue with the good will I mean 190 00:09:35,880 --> 00:09:38,600 Speaker 1: G reviewed that as recently as the second quarter and 191 00:09:38,679 --> 00:09:41,800 Speaker 1: said that the you know, caring value exceeded the fair 192 00:09:41,880 --> 00:09:44,080 Speaker 1: value and so too. Then all of a sudden do 193 00:09:44,080 --> 00:09:46,760 Speaker 1: a complete all of a sudden, have this twenty two 194 00:09:46,760 --> 00:09:50,200 Speaker 1: billion dollar charge. I think those are the same questions. Now. 195 00:09:50,480 --> 00:09:53,439 Speaker 1: The difference, I think, and the bigger point is that 196 00:09:53,679 --> 00:09:57,079 Speaker 1: G also said the d o J is now investigating 197 00:09:57,280 --> 00:09:59,760 Speaker 1: the same things the SEC was looking into, including this 198 00:09:59,800 --> 00:10:02,040 Speaker 1: good will charge the Department of Justice, meaning it could 199 00:10:02,040 --> 00:10:05,120 Speaker 1: be potentially criminal. Yes, and so I think that obviously 200 00:10:05,160 --> 00:10:08,240 Speaker 1: adds another element of risk here. The other factor is 201 00:10:09,000 --> 00:10:11,320 Speaker 1: now that you're bringing this good will charge into the 202 00:10:11,440 --> 00:10:14,920 Speaker 1: SEC and based investigation. There's a number of shareholder fraud 203 00:10:15,120 --> 00:10:20,360 Speaker 1: lawsuits out there against GE related to that insurance reserve shortfall. 204 00:10:21,000 --> 00:10:23,800 Speaker 1: This just sort of adds more fuel to their claims. 205 00:10:24,520 --> 00:10:26,560 Speaker 1: I wonder if you could tell us what the effect 206 00:10:26,679 --> 00:10:29,839 Speaker 1: or potential effect this might have on the credit rating 207 00:10:30,040 --> 00:10:33,880 Speaker 1: of g E. Yes, so um SMP has cut its 208 00:10:33,920 --> 00:10:37,559 Speaker 1: credit rating on GE earlier this month or now at 209 00:10:37,920 --> 00:10:40,720 Speaker 1: B B B plus, down from A, and Moody's and 210 00:10:40,760 --> 00:10:44,520 Speaker 1: Fish put their ratings on review for downgrade Um. Personally, 211 00:10:44,559 --> 00:10:47,520 Speaker 1: I have to say that's long overdue, and they were 212 00:10:47,559 --> 00:10:50,040 Speaker 1: about the last people to wake up to the fact 213 00:10:50,080 --> 00:10:54,400 Speaker 1: that gees earnings and debt prospects for the foreseeable future 214 00:10:54,400 --> 00:10:58,520 Speaker 1: are nowhere near that realm of credit worthiness. Um, you know, 215 00:10:58,600 --> 00:11:02,640 Speaker 1: in terms of the numbers from today changing their outlook. 216 00:11:02,640 --> 00:11:06,000 Speaker 1: I don't know if there's anything that would necessarily, you know, 217 00:11:06,120 --> 00:11:08,480 Speaker 1: dilute that more other than just sort of the ongoing 218 00:11:08,600 --> 00:11:11,480 Speaker 1: challenges that the power unit, which g says is going 219 00:11:11,520 --> 00:11:14,360 Speaker 1: to cause it to significantly miss its cash flow targets 220 00:11:14,360 --> 00:11:18,480 Speaker 1: for the year. So why were the shares up ahead 221 00:11:18,480 --> 00:11:21,280 Speaker 1: of the market open when the company said that it 222 00:11:21,320 --> 00:11:24,080 Speaker 1: was going to cut its dividend, which was widely expected, 223 00:11:24,080 --> 00:11:26,679 Speaker 1: but still it means that shareholders are getting less money 224 00:11:26,800 --> 00:11:30,439 Speaker 1: and missed estimates, and still their shares were rallying until 225 00:11:30,720 --> 00:11:33,160 Speaker 1: I mean, it almost makes you feel like they shouldn't 226 00:11:33,160 --> 00:11:37,440 Speaker 1: have conference calls, right, But no, I I think you 227 00:11:37,480 --> 00:11:39,679 Speaker 1: know why you saw the shares railing. The divon and 228 00:11:39,800 --> 00:11:42,360 Speaker 1: cut was expected, but I think it's the kind of 229 00:11:42,400 --> 00:11:45,839 Speaker 1: aggressive action people are really looking for out of Larry 230 00:11:45,880 --> 00:11:47,920 Speaker 1: colpe Um. And I think I talked with you at 231 00:11:47,960 --> 00:11:50,000 Speaker 1: the time when John Flannery cut the divon in last 232 00:11:50,040 --> 00:11:52,640 Speaker 1: year about how it probably wasn't going to be enough 233 00:11:52,679 --> 00:11:54,560 Speaker 1: and that the payout was still going to soak up 234 00:11:54,880 --> 00:11:57,719 Speaker 1: way too higher percentage of their free cash flow. Um. 235 00:11:57,760 --> 00:12:00,160 Speaker 1: And that was with their you know, old target. Now 236 00:12:00,160 --> 00:12:02,880 Speaker 1: obviously with the new target, it becomes even more untenable. 237 00:12:02,880 --> 00:12:06,000 Speaker 1: And so I think this was a bold step and 238 00:12:06,040 --> 00:12:08,320 Speaker 1: it was also a necessary step when you look at 239 00:12:08,320 --> 00:12:10,680 Speaker 1: all of these potential capital calls, the g E and 240 00:12:10,760 --> 00:12:13,600 Speaker 1: the ongoing struggles in G Power. I mean, he needed 241 00:12:13,600 --> 00:12:16,400 Speaker 1: to do something to shore up the balance sheet, and 242 00:12:16,520 --> 00:12:20,240 Speaker 1: I think this was what investors were looking for. Um. 243 00:12:20,280 --> 00:12:22,960 Speaker 1: You know, and there's some debate about GE has long 244 00:12:23,040 --> 00:12:27,640 Speaker 1: been sort of a retail investor attraction, but you know, 245 00:12:27,720 --> 00:12:30,320 Speaker 1: you probably lost some of that base when they cut 246 00:12:30,320 --> 00:12:32,240 Speaker 1: the dividend the first time around. So that maybe why 247 00:12:32,240 --> 00:12:35,560 Speaker 1: you're not saying quite as painful of a reaction. Is 248 00:12:35,600 --> 00:12:41,120 Speaker 1: the power unit at GE salvage herble? Yeah, Uh, that 249 00:12:41,320 --> 00:12:44,480 Speaker 1: is the question. Um, you know, there's a lot of 250 00:12:44,760 --> 00:12:47,240 Speaker 1: debate about this. I do think it's interesting what they're doing. 251 00:12:47,280 --> 00:12:49,160 Speaker 1: So they said they're going to split the power unit 252 00:12:49,240 --> 00:12:52,000 Speaker 1: into two, and so one will be primarily focused on 253 00:12:52,440 --> 00:12:55,720 Speaker 1: the gas, turbines, equipment, and services, and then the other 254 00:12:55,760 --> 00:12:57,760 Speaker 1: will be sort of all of these other assets that 255 00:12:57,800 --> 00:13:01,199 Speaker 1: are in power, so that's steam, that's nuclear, that's power convergent. 256 00:13:01,920 --> 00:13:04,840 Speaker 1: Not all of those other assets are bad and they're 257 00:13:04,880 --> 00:13:09,000 Speaker 1: not necessarily as exposed to this sort of structural transition 258 00:13:09,080 --> 00:13:13,400 Speaker 1: where you know, the preference is really shifting to renewable 259 00:13:13,440 --> 00:13:16,640 Speaker 1: energy technologies because they're cheaper. But some of these assets, 260 00:13:16,679 --> 00:13:20,760 Speaker 1: like industrial focus generation equipment or the grid's business, those 261 00:13:20,760 --> 00:13:23,839 Speaker 1: still have a relatively viable outlook. I mean, you think 262 00:13:23,880 --> 00:13:25,920 Speaker 1: about a b b is trying to sell its grids 263 00:13:25,960 --> 00:13:28,240 Speaker 1: business and it is getting pretty high valuations for it. 264 00:13:28,280 --> 00:13:30,200 Speaker 1: And so the idea here is to sort of create 265 00:13:30,679 --> 00:13:33,680 Speaker 1: i mean almost a bad bank of power assets and 266 00:13:33,720 --> 00:13:36,560 Speaker 1: then you know, an okayish bank of these other assets. 267 00:13:36,559 --> 00:13:40,280 Speaker 1: So that should help. The other big thing is cost cuts, um, 268 00:13:40,400 --> 00:13:43,560 Speaker 1: but you know, there's a big debate on how much 269 00:13:43,600 --> 00:13:45,400 Speaker 1: those cost cuts are actually going to translate to the 270 00:13:45,440 --> 00:13:48,040 Speaker 1: bottom line. G has done a lot of restructuring over 271 00:13:48,040 --> 00:13:50,240 Speaker 1: the years, and we haven't really seen that playoff, and 272 00:13:50,240 --> 00:13:52,840 Speaker 1: there's issues in Europe to given the agreements that they 273 00:13:52,920 --> 00:13:55,840 Speaker 1: made as part of the Alstom deal around jobs numbers 274 00:13:56,000 --> 00:13:58,560 Speaker 1: as to how deep they can cut their many Thanks 275 00:13:59,040 --> 00:14:03,000 Speaker 1: always Brooks Otherland, a Bloomberg opinion columnist all about deals 276 00:14:03,000 --> 00:14:21,520 Speaker 1: and industrial companies. After the close of trading today, we 277 00:14:21,560 --> 00:14:25,320 Speaker 1: will get quarterly results from Facebook. And here to tell 278 00:14:25,400 --> 00:14:28,840 Speaker 1: us about Facebook and other technology stocks is none other 279 00:14:28,920 --> 00:14:33,240 Speaker 1: than Colin Gillis, the director of research for Chatham Road Partners. 280 00:14:33,600 --> 00:14:36,520 Speaker 1: Colin Gillis, is Facebook as big as it's going to 281 00:14:36,560 --> 00:14:40,760 Speaker 1: ever get him? It's always a wonderful pleasure to speak 282 00:14:40,800 --> 00:14:43,800 Speaker 1: with you. And let's put this into perspective. Right, we've 283 00:14:43,800 --> 00:14:47,960 Speaker 1: gotten three names out of the five letter fang tech 284 00:14:48,000 --> 00:14:53,440 Speaker 1: stocks that have reported, right, Facebook, Apple, Amazon, Netflix, and Google. 285 00:14:53,720 --> 00:14:56,400 Speaker 1: And then we know that of the Amazon, Netflix and 286 00:14:56,440 --> 00:14:59,360 Speaker 1: Google reports that we've seen, the stocks have all traded 287 00:14:59,400 --> 00:15:03,280 Speaker 1: down today. Is Facebook's turned The stock has declined over 288 00:15:04,120 --> 00:15:07,080 Speaker 1: from a tie in July. I do not think it's peaked. 289 00:15:08,400 --> 00:15:10,800 Speaker 1: You don't think it's peaked. In other words, I do 290 00:15:10,840 --> 00:15:14,600 Speaker 1: not you think that it's going to rally. I do, right, 291 00:15:14,680 --> 00:15:19,440 Speaker 1: And so I understand the concerns that they're running out 292 00:15:19,440 --> 00:15:23,360 Speaker 1: of users, right, the concerns literally you know they've got 293 00:15:23,360 --> 00:15:25,800 Speaker 1: around two point two billion users are about three point 294 00:15:25,840 --> 00:15:29,760 Speaker 1: five billion humans on the Internet, So that's going to 295 00:15:29,800 --> 00:15:34,120 Speaker 1: be a constraint factor. I definitely understand that they're putting 296 00:15:34,120 --> 00:15:39,440 Speaker 1: in more and more expenses around privacy and contact control, right, 297 00:15:39,600 --> 00:15:41,880 Speaker 1: but they're going to be able to extract over time 298 00:15:42,480 --> 00:15:47,600 Speaker 1: more value per user. And while you may see margins 299 00:15:47,640 --> 00:15:50,520 Speaker 1: come down, they've told us that quite clearly, Right, this 300 00:15:50,680 --> 00:15:53,360 Speaker 1: is still a company that's going to grow its revenue 301 00:15:53,400 --> 00:15:57,840 Speaker 1: this quarter, somewhere along the lines of you know, on 302 00:15:57,880 --> 00:16:00,280 Speaker 1: a year of a year basis, it's a real bit nous, 303 00:16:01,760 --> 00:16:06,360 Speaker 1: if it's a real business, then those billions of users 304 00:16:07,000 --> 00:16:12,200 Speaker 1: are potentially at risk if something goes wrong with the platform, 305 00:16:12,240 --> 00:16:16,280 Speaker 1: and something has gone wrong previously correct, correct, Yeah, And 306 00:16:16,520 --> 00:16:18,800 Speaker 1: this is you know, this is the risk reward equation, right, 307 00:16:18,800 --> 00:16:22,080 Speaker 1: and this is why some people have decided to exit 308 00:16:22,160 --> 00:16:25,440 Speaker 1: their investments and rotate their money into other names. Right. 309 00:16:25,520 --> 00:16:28,880 Speaker 1: But given the magnitude of the pullback, and also you 310 00:16:28,920 --> 00:16:31,240 Speaker 1: said hasn't gotten as large as E were going to get. 311 00:16:31,920 --> 00:16:36,400 Speaker 1: It's market cap is four billion dollars, well, still well 312 00:16:36,440 --> 00:16:38,560 Speaker 1: below you know where Google is at it, you know, 313 00:16:38,720 --> 00:16:46,040 Speaker 1: with seven seventeen Amazon, right, much larger than Netflix. Well, Colin, 314 00:16:46,040 --> 00:16:49,600 Speaker 1: I'm wondering heading into what was your outlook on Facebook shares. 315 00:16:51,240 --> 00:16:55,000 Speaker 1: So we were uh concerned for four pull back. We 316 00:16:55,040 --> 00:16:57,600 Speaker 1: were concerned that the market was not factoring in the 317 00:16:57,680 --> 00:17:01,640 Speaker 1: costs related to the obviously efforts that they were that 318 00:17:01,720 --> 00:17:05,399 Speaker 1: they had to implement. Right, and some of that did 319 00:17:05,560 --> 00:17:08,000 Speaker 1: bear out to be true, But now I think the 320 00:17:08,000 --> 00:17:10,400 Speaker 1: pendulum has swung too far the other way. Well, hold 321 00:17:10,400 --> 00:17:12,480 Speaker 1: on a second, because you were talking about how it's 322 00:17:12,480 --> 00:17:14,600 Speaker 1: a real business and how it's you know, it's not 323 00:17:14,680 --> 00:17:17,000 Speaker 1: as big as Google, for example. But at the end 324 00:17:17,040 --> 00:17:20,000 Speaker 1: of the day, Facebook essentially is an advertising platform. Is 325 00:17:20,119 --> 00:17:22,800 Speaker 1: essentially a place where they have a lot of eyeballs 326 00:17:22,840 --> 00:17:26,600 Speaker 1: and they can distribute content to them. But if they're 327 00:17:26,640 --> 00:17:31,879 Speaker 1: algorithms and if their privacy standards are questioned, that undermines 328 00:17:32,280 --> 00:17:35,960 Speaker 1: their business model, albeit real or not. Well, it only 329 00:17:36,000 --> 00:17:39,760 Speaker 1: undermines that business model if we see users leaving the platform, 330 00:17:39,840 --> 00:17:42,679 Speaker 1: and if we see advertisers leaving the platform. Right, and 331 00:17:42,680 --> 00:17:45,080 Speaker 1: so we're gonna see that. We're gonna get that data 332 00:17:45,359 --> 00:17:48,000 Speaker 1: literally literally, you know, in a few hours, right, and 333 00:17:48,040 --> 00:17:52,119 Speaker 1: we'll see the particularly the most valuable component are the 334 00:17:52,160 --> 00:17:55,320 Speaker 1: North American right monthly active users, and we'll see if 335 00:17:55,320 --> 00:17:57,560 Speaker 1: that number moves, right, it's kind of stalled out right, 336 00:17:57,720 --> 00:18:00,760 Speaker 1: you know they were it's around two one million, right, 337 00:18:01,200 --> 00:18:03,440 Speaker 1: you know, any lift from that number last quarter would 338 00:18:03,480 --> 00:18:07,359 Speaker 1: be would be a positive. So you know it's not 339 00:18:07,400 --> 00:18:10,120 Speaker 1: going to grow much. But if you can extract more 340 00:18:10,200 --> 00:18:13,840 Speaker 1: revenue from those people, right, and that number that are 341 00:18:13,960 --> 00:18:17,880 Speaker 1: two the average revenue per user is people are expecting 342 00:18:18,119 --> 00:18:21,119 Speaker 1: a nice hefty lift on that. The estimate is that 343 00:18:21,240 --> 00:18:24,320 Speaker 1: each user in the United States or Canada generates about 344 00:18:24,320 --> 00:18:31,040 Speaker 1: twenty six dollars in revenue for the company. Right, all right, 345 00:18:31,440 --> 00:18:35,840 Speaker 1: Now you talk about the potential for Facebook, do they 346 00:18:35,920 --> 00:18:41,720 Speaker 1: have a plan for how to monetize What's App? Well, 347 00:18:42,119 --> 00:18:45,920 Speaker 1: you know, what's app is a wonderful messaging service. Messaging 348 00:18:45,960 --> 00:18:50,240 Speaker 1: in and of itself has not been very well monetized, 349 00:18:51,359 --> 00:18:55,520 Speaker 1: and so I wouldn't be focused as much on the one. 350 00:18:55,600 --> 00:18:57,200 Speaker 1: I wouldn't be an investor based on the what's that 351 00:18:57,359 --> 00:18:59,800 Speaker 1: part of the story. I wouldn't be an investor based 352 00:18:59,840 --> 00:19:03,720 Speaker 1: on uh oculus part of the story. Right, Instagram is 353 00:19:03,720 --> 00:19:07,760 Speaker 1: obviously also a growing, flourishing business. It's going to have 354 00:19:07,800 --> 00:19:11,879 Speaker 1: the same monetization opportunities as Facebook, right, But you want 355 00:19:11,920 --> 00:19:14,639 Speaker 1: to make sure that the core business itself is is 356 00:19:14,680 --> 00:19:17,240 Speaker 1: that they're able to stabilize it. They're able to do 357 00:19:17,320 --> 00:19:20,560 Speaker 1: so in a way where they can retain their users, 358 00:19:20,560 --> 00:19:23,400 Speaker 1: where they can retain their advertisers, and that they can 359 00:19:23,520 --> 00:19:28,720 Speaker 1: can quell both public perception as well as investor concerned 360 00:19:29,080 --> 00:19:32,880 Speaker 1: that the management team has a privacy issue that they 361 00:19:33,200 --> 00:19:36,320 Speaker 1: can't contain. Let's shift our focus a little bit to Thursday. 362 00:19:36,320 --> 00:19:39,440 Speaker 1: That's when Apple is going to report their third quarter earnings. 363 00:19:39,440 --> 00:19:43,040 Speaker 1: Shares of that company up almost year to date. What 364 00:19:43,080 --> 00:19:45,879 Speaker 1: are you expecting to hear from them, right, you know? 365 00:19:45,920 --> 00:19:50,080 Speaker 1: And so the thing with Apple is, while everyone you 366 00:19:50,080 --> 00:19:52,840 Speaker 1: know will dissect the numbers that the report, the most 367 00:19:52,880 --> 00:19:56,240 Speaker 1: important piece of information they'll give will be the guidance 368 00:19:56,240 --> 00:20:00,080 Speaker 1: for the December quarter because they're still very stacked to 369 00:20:00,280 --> 00:20:04,720 Speaker 1: the holiday season. And right, if you focus on the 370 00:20:04,720 --> 00:20:08,920 Speaker 1: iPhone itself, right, the concern that the thesis is one 371 00:20:08,920 --> 00:20:12,040 Speaker 1: of two things. Right, it's a stable platform on which 372 00:20:12,040 --> 00:20:15,520 Speaker 1: they can build a successful services business on top of right, 373 00:20:16,040 --> 00:20:20,320 Speaker 1: and that's a positive thesis. Or you look at the 374 00:20:20,440 --> 00:20:22,880 Speaker 1: units of iPhones and you say they've done a good 375 00:20:22,960 --> 00:20:26,719 Speaker 1: job of driving more revenue per phone. But if you're 376 00:20:26,720 --> 00:20:30,240 Speaker 1: concerned that the unit base you know, is either growing 377 00:20:30,280 --> 00:20:35,520 Speaker 1: and you know, small single digit numbers, or possibly even shrinking, 378 00:20:35,560 --> 00:20:37,680 Speaker 1: but the revenue is being made up because they're getting 379 00:20:37,680 --> 00:20:41,280 Speaker 1: more revenue per phone. Then that may impact the services 380 00:20:41,320 --> 00:20:45,040 Speaker 1: business and its ability to grow, because a big part 381 00:20:45,040 --> 00:20:47,159 Speaker 1: of the of the story and the thesis is that 382 00:20:47,280 --> 00:20:52,080 Speaker 1: the services business will become a major margin driver and 383 00:20:52,119 --> 00:20:56,320 Speaker 1: will add a higher multiple business onto the lower multiple hardware, 384 00:20:56,640 --> 00:21:01,280 Speaker 1: onto the hardware side, thinner, lighter and has written a 385 00:21:01,480 --> 00:21:05,320 Speaker 1: display that's the description of the new MacBook Air that's 386 00:21:05,400 --> 00:21:08,959 Speaker 1: just been released and is on sale from Apple. Do 387 00:21:08,960 --> 00:21:12,080 Speaker 1: you believe that the desktop or the laptop or the 388 00:21:12,119 --> 00:21:18,240 Speaker 1: computer and PC business for Apple is important? It's you know, 389 00:21:18,240 --> 00:21:20,840 Speaker 1: it's it's it's really just icing on the cake, right 390 00:21:21,280 --> 00:21:24,639 Speaker 1: and depending on how the phones move and and the 391 00:21:24,800 --> 00:21:27,439 Speaker 1: r poos, right, the rest of it is, you know, 392 00:21:27,520 --> 00:21:31,640 Speaker 1: just kind of consider ampler information. Thank you so much 393 00:21:31,680 --> 00:21:33,520 Speaker 1: for being with us. Colin Gillis, a director of research. 394 00:21:33,680 --> 00:21:37,520 Speaker 1: Chatham wrote partners talking about what to expect with Facebook 395 00:21:37,560 --> 00:21:39,880 Speaker 1: coming out after the bell with their earnings, as well 396 00:21:39,920 --> 00:21:55,959 Speaker 1: as Apple under armour has been a stock that has 397 00:21:56,000 --> 00:21:58,800 Speaker 1: been hard to get right. Today it is surging at 398 00:21:58,880 --> 00:22:02,960 Speaker 1: twenty six per scent after demonstrating that it's turnaround is 399 00:22:03,160 --> 00:22:05,879 Speaker 1: taking hold. That is the biggest one day pop in 400 00:22:05,880 --> 00:22:07,879 Speaker 1: the share since two thousand and eight. Joining us to 401 00:22:07,880 --> 00:22:10,119 Speaker 1: break it all down, give us a sense of what's ahead. 402 00:22:10,200 --> 00:22:13,919 Speaker 1: Is Channa cartuitis He's apparel and footwear analyst for Bloomberg Intelligence. 403 00:22:14,400 --> 00:22:17,440 Speaker 1: So Chenn, what's your take? What exactly drove there better 404 00:22:17,440 --> 00:22:22,760 Speaker 1: than expected results? Yeah? High, I think this is today 405 00:22:22,880 --> 00:22:26,240 Speaker 1: we actually see the first phase of the turnaround UM 406 00:22:26,280 --> 00:22:29,720 Speaker 1: actually benefiting the company UM. And I think it's mainly 407 00:22:29,720 --> 00:22:32,120 Speaker 1: on the margin side, and and they took a few 408 00:22:32,119 --> 00:22:34,560 Speaker 1: steps that are necessary for the business, but they were 409 00:22:34,640 --> 00:22:36,800 Speaker 1: very hard to do UM. So, first of all, the 410 00:22:36,800 --> 00:22:39,760 Speaker 1: inventory inventory was done one percent versus last year, and 411 00:22:39,760 --> 00:22:41,879 Speaker 1: that was a surprise because we were expecting it to 412 00:22:41,920 --> 00:22:45,000 Speaker 1: be a lot higher. And when you have less inventory 413 00:22:45,280 --> 00:22:48,000 Speaker 1: is when you have to do a less discounting. So 414 00:22:48,119 --> 00:22:52,280 Speaker 1: in Bloomber Intelligence, we track, for example, the promotional emails 415 00:22:52,320 --> 00:22:54,560 Speaker 1: year of year. So last year in the third quarter 416 00:22:54,600 --> 00:22:56,720 Speaker 1: we had about thirty three emails we got from them. 417 00:22:56,960 --> 00:23:00,920 Speaker 1: This year's only twenty, so there's a thirty percent decrease 418 00:23:00,960 --> 00:23:04,439 Speaker 1: in discounting. So gross margin the higher and that's what 419 00:23:04,560 --> 00:23:07,840 Speaker 1: drove most of the benefit this quarter. Just say that again, 420 00:23:07,920 --> 00:23:11,880 Speaker 1: you tracked the number of promotional emails that are sent 421 00:23:11,960 --> 00:23:16,399 Speaker 1: out by like every company, for the companies we cover, yes, 422 00:23:16,440 --> 00:23:19,080 Speaker 1: and it gives us some indication year of a year 423 00:23:19,160 --> 00:23:22,800 Speaker 1: how promotions look like. Clearly, because I noted that the 424 00:23:22,920 --> 00:23:27,800 Speaker 1: retailers cited under Armour in several cases as being the 425 00:23:27,880 --> 00:23:31,239 Speaker 1: cause for why their numbers were not better because they 426 00:23:31,280 --> 00:23:34,399 Speaker 1: were flushing out the inventory that I guess under Armour 427 00:23:34,400 --> 00:23:37,199 Speaker 1: had shipped to them, right, So under Arma would have 428 00:23:37,280 --> 00:23:40,160 Speaker 1: different channels to clear their inventories. So you know, while 429 00:23:40,200 --> 00:23:44,560 Speaker 1: the retailers have elevated inventory under Arma, we're not promoting 430 00:23:44,680 --> 00:23:47,240 Speaker 1: their own in their own channels, so they're able to 431 00:23:47,280 --> 00:23:49,639 Speaker 1: get their margins on that side. Is this is this 432 00:23:49,720 --> 00:23:53,280 Speaker 1: a story about international growth versus growth in the United 433 00:23:53,320 --> 00:23:56,600 Speaker 1: States for under Armour. So under Armory is still mostly 434 00:23:56,760 --> 00:23:59,359 Speaker 1: US a lot more than you know, their competitors like 435 00:23:59,440 --> 00:24:01,960 Speaker 1: Nike and Adidas. So yeah, they're still let's say they're 436 00:24:01,960 --> 00:24:05,119 Speaker 1: still seeing you know, double digit growth in international markets, 437 00:24:05,119 --> 00:24:07,920 Speaker 1: but it's a much much lower base. UM we saw 438 00:24:07,960 --> 00:24:09,639 Speaker 1: a pause and then in the the third quarter it was 439 00:24:09,680 --> 00:24:12,920 Speaker 1: only about UM they think they're gonna see the re 440 00:24:13,000 --> 00:24:15,160 Speaker 1: acceleration of that in the fourth quarter, so going back 441 00:24:15,160 --> 00:24:18,400 Speaker 1: to a growth. So it's it's for the most part, 442 00:24:18,400 --> 00:24:21,199 Speaker 1: it's an international story. For undrum. The interesting thing to 443 00:24:21,280 --> 00:24:24,440 Speaker 1: me is how under armour certainly is an idiosyncratic story. 444 00:24:24,440 --> 00:24:26,760 Speaker 1: But I'm looking right now at the SMP five hundred 445 00:24:26,840 --> 00:24:31,080 Speaker 1: sub index of retailers, which is actually outperforming the broader 446 00:24:31,200 --> 00:24:34,320 Speaker 1: SMP index year to date, which is a surprise because 447 00:24:34,320 --> 00:24:36,919 Speaker 1: this industry had been left for dead. What does that 448 00:24:37,000 --> 00:24:39,359 Speaker 1: tell you? So you know what I gotta I gotta 449 00:24:39,359 --> 00:24:41,600 Speaker 1: say when we're going into I had a you know, 450 00:24:41,760 --> 00:24:44,480 Speaker 1: feeling and looking at the data, that is going to 451 00:24:44,520 --> 00:24:47,240 Speaker 1: be the year that retailers actually fight back the five 452 00:24:47,280 --> 00:24:49,640 Speaker 1: back Amazon, the fight back the shift to e commerce. 453 00:24:50,119 --> 00:24:53,480 Speaker 1: They're trying to um. You know, they are in a 454 00:24:53,480 --> 00:24:56,119 Speaker 1: mode of surviving survival, so closing stores, we're just in 455 00:24:56,119 --> 00:24:58,320 Speaker 1: the inventory. But now they're trying to figure that out. 456 00:24:58,480 --> 00:25:01,120 Speaker 1: So now they they're starting to at tools to actually 457 00:25:01,840 --> 00:25:05,600 Speaker 1: help them compete with their online competitors, so, you know, 458 00:25:05,680 --> 00:25:08,920 Speaker 1: getting better insights from data online on you know, which 459 00:25:09,000 --> 00:25:12,560 Speaker 1: inventory they should put in which stores. UM, that helps 460 00:25:12,600 --> 00:25:15,639 Speaker 1: them to again avoid discounting so less inventory in stores 461 00:25:15,680 --> 00:25:19,359 Speaker 1: that are not doing well. Um, cutting the cycles of 462 00:25:19,400 --> 00:25:21,840 Speaker 1: getting merchandise into the stores. Instead of the nine to 463 00:25:21,920 --> 00:25:24,440 Speaker 1: twelve months, now you can go three to six months. 464 00:25:24,480 --> 00:25:27,399 Speaker 1: So you're better, you know, you have a better idea 465 00:25:27,480 --> 00:25:29,080 Speaker 1: and the trends out there in the market. Then you're 466 00:25:29,080 --> 00:25:31,399 Speaker 1: not bringing in merchandise. It's not going to sell fast. 467 00:25:31,720 --> 00:25:34,280 Speaker 1: So its retailers are getting smarter about what they're selling 468 00:25:34,320 --> 00:25:36,919 Speaker 1: the store. Um. I think people are feeling compelled to 469 00:25:36,920 --> 00:25:38,600 Speaker 1: go and visit the stores because they look better and 470 00:25:38,600 --> 00:25:43,000 Speaker 1: they have more you know, on trend stuff. Um. Therefore 471 00:25:43,000 --> 00:25:45,879 Speaker 1: the seals are beratter, margins are better. Can you speak 472 00:25:45,920 --> 00:25:49,560 Speaker 1: to any product that they've introduced that is a big 473 00:25:49,600 --> 00:25:53,199 Speaker 1: winner for them right now, specifically und armor? Yeah. I 474 00:25:53,200 --> 00:25:55,960 Speaker 1: think actually that's part of the problem, um, because what 475 00:25:55,960 --> 00:25:58,679 Speaker 1: we're seeing is the turnaround is mainly about the margin. 476 00:25:58,800 --> 00:26:02,040 Speaker 1: I'm still waiting to see in the product pipeline what's 477 00:26:02,040 --> 00:26:04,719 Speaker 1: going to be the next hit. Now next month in December, 478 00:26:04,720 --> 00:26:06,480 Speaker 1: they're gonna have an investor day, and I think over 479 00:26:06,520 --> 00:26:08,639 Speaker 1: there we're going to see some of the new products 480 00:26:08,640 --> 00:26:12,200 Speaker 1: are going to come out next year in to reignite 481 00:26:12,200 --> 00:26:14,800 Speaker 1: the growth rather than just the margins. They're going to 482 00:26:14,880 --> 00:26:17,600 Speaker 1: be using technology to make these textiles and these products. 483 00:26:17,640 --> 00:26:20,120 Speaker 1: I mean they got hoodies, joggers, polos, underwear, I mean 484 00:26:20,119 --> 00:26:24,399 Speaker 1: everything you know, cold gear, hot gear, compression gear. I 485 00:26:24,440 --> 00:26:26,520 Speaker 1: think they want to be known as as the company 486 00:26:26,520 --> 00:26:29,320 Speaker 1: that actually brings into science into their apparel and footwear. 487 00:26:29,400 --> 00:26:31,040 Speaker 1: And I think that's the message they want to send 488 00:26:31,080 --> 00:26:32,720 Speaker 1: to the consumers and they're going to continue to do 489 00:26:32,840 --> 00:26:36,680 Speaker 1: so going forward. So is under Armour grabbing share from 490 00:26:36,800 --> 00:26:40,680 Speaker 1: other retailers or is this just sort of a general 491 00:26:40,720 --> 00:26:44,199 Speaker 1: increase in demand across the boarders the economy expands. So 492 00:26:44,320 --> 00:26:46,359 Speaker 1: that's not happening yet. So I don't think they're taking 493 00:26:46,359 --> 00:26:48,600 Speaker 1: share away from Nike audit does. It's just that the 494 00:26:48,960 --> 00:26:51,120 Speaker 1: sales that they are getting, they're getting in a much 495 00:26:51,160 --> 00:26:53,720 Speaker 1: better margin than they did before, so they don't have 496 00:26:53,760 --> 00:26:55,920 Speaker 1: to clear as much inventory. So we're not seeing that 497 00:26:56,280 --> 00:26:58,600 Speaker 1: grabbing share yet, but we might next year. And it 498 00:26:58,720 --> 00:27:01,920 Speaker 1: is a competitive business, very competitive business, and very hard 499 00:27:01,960 --> 00:27:04,040 Speaker 1: to get into. If you're not easy to make shoes, no, 500 00:27:04,440 --> 00:27:06,720 Speaker 1: and not to make them in the volume that Adidas 501 00:27:06,800 --> 00:27:09,040 Speaker 1: or Audi Das as well as Nike makes, and make 502 00:27:09,200 --> 00:27:11,720 Speaker 1: you and make it the design compelling enough of people 503 00:27:11,760 --> 00:27:15,360 Speaker 1: to buy. Maybe Elon Musk will get into it. Oh 504 00:27:15,560 --> 00:27:18,720 Speaker 1: there you go from your lips. All right, No that's 505 00:27:19,400 --> 00:27:22,800 Speaker 1: I'm not sorry, sorry, not sorry, sorry not I see 506 00:27:22,840 --> 00:27:25,639 Speaker 1: footwear in your future. Thanks very much for being with us. 507 00:27:26,080 --> 00:27:31,399 Speaker 1: And Grass is a apparel and footwear analyst for Bloomberg Intelligence. 508 00:27:31,440 --> 00:27:35,560 Speaker 1: You can follow him on Twitter at se Gratis. Now 509 00:27:35,680 --> 00:27:40,240 Speaker 1: spell it c g R A z U t I s. 510 00:27:40,320 --> 00:27:41,840 Speaker 1: We all follow him because we want to know what's 511 00:27:41,880 --> 00:27:48,919 Speaker 1: going on in the world of apparel and footwear. Thanks 512 00:27:48,920 --> 00:27:51,560 Speaker 1: for listening to the Bloomberg P and L podcast. You 513 00:27:51,600 --> 00:27:55,359 Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud, 514 00:27:55,480 --> 00:27:58,920 Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm 515 00:27:59,000 --> 00:28:03,000 Speaker 1: on Twitter at Pam Fox. I'm on Twitter at Lisa Abramo. 516 00:28:03,119 --> 00:28:05,719 Speaker 1: It's one before the podcast. You can always catch us 517 00:28:05,760 --> 00:28:07,320 Speaker 1: worldwide on Bloomberg Radio.