WEBVTT - Merlin's Obuchowski on AAPL: Not Impressed With Tim Cook(Audio)

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>This is a Bloomberg Business Flag BOM Bloomberg World Handquarters.

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<v Speaker 1>I'm Charlie Pellett, SMP five hundred Index on track for

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<v Speaker 1>a losing day, in fact, heading towards the longest weekly

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<v Speaker 1>losing streak in four months amid lackluster results from large retailers,

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<v Speaker 1>a topic we were just discussing nords from shares. They

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<v Speaker 1>are now down by fourteen point three percent. The SMP

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<v Speaker 1>downs seventeen of the cline of eight tenths of one

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<v Speaker 1>percent down industrials close to the worst level of the day,

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<v Speaker 1>down one d eighty one points. The drop there of

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<v Speaker 1>one percent and has stack down nineteen a drop of

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<v Speaker 1>point four percent. Gold up three dollars, the ounce to

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<v Speaker 1>twelve seventy four, a gain of two tenths of one percent.

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<v Speaker 1>Your tenure of fourteen thirty seconds, the yield there one

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<v Speaker 1>point seven oh percent. I'm Charlie Pellett, and that's a

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<v Speaker 1>Bloomberg Business Flash. Charlie Pellett, thanks so very much. Don't

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<v Speaker 1>know but the E E t F Report brought to you

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<v Speaker 1>by Van ECK vectors e t F s expect more

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<v Speaker 1>vaneck dot com slash Muni Vanek access the opportunities for this.

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<v Speaker 1>Now we turn to Bloomberg's Confine Cotterie Smart Beta has

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<v Speaker 1>come to the fixed income e t F market. Index

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<v Speaker 1>i Q has introduced to e t S based on

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<v Speaker 1>a momentum investing approach to fixed income markets to really

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<v Speaker 1>take some pain out of investors portfolios and let some

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<v Speaker 1>sleep at night not having to retilt their portfolios every

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<v Speaker 1>time the Fed makes a move or a dozen. That's

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<v Speaker 1>Adam Patty, index i q's chief executive. Patty explains the

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<v Speaker 1>strategy behind the i Q Enhanced Core Bond U S

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<v Speaker 1>e TS. We take the investable M bond segments, whether

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<v Speaker 1>it's governments, corporates, and the mortgage backs in the Enhanced

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<v Speaker 1>and we use a momentum factor to tilt between those

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<v Speaker 1>different asset classes to allow investors really to get more

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<v Speaker 1>from their core investment. Patty says their second new e

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<v Speaker 1>t F, the i Q Enhanced Core Plus Bond U

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<v Speaker 1>S a t F as U S higled debt in

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<v Speaker 1>the mix along with a dollar denominated debt of emerging

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<v Speaker 1>market issuers. Both e t F s have an expense

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<v Speaker 1>ratio of thirty four basis points. They trade under the

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<v Speaker 1>symbols A G G E and A G G P.

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<v Speaker 1>That's your Bloomberg ETF report. I'm Catherine Cowderie. All Right,

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<v Speaker 1>the sun it's going down just a little bit here

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<v Speaker 1>in Bermuda. We are broadcasting live from Elbow Beach, Bermuda,

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<v Speaker 1>an ocean front Enclavo classic style and contemporary luxury. Our

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<v Speaker 1>next guest is very jealous that we are near the

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<v Speaker 1>water because Michael Obohofsky, the founder of Merlin Asset Management

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<v Speaker 1>based in Boston. He's a competitive sailor in addition to

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<v Speaker 1>the fact that he probably has a good good qualification

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<v Speaker 1>for understanding the psychology of investors, because dr Obohovsky knows

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<v Speaker 1>a lot about psychiatry. He was going to be a

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<v Speaker 1>doctor at one point, and he earned his PhD in

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<v Speaker 1>clinical psychology from the New School for Social Research. Michael Okhovski,

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<v Speaker 1>thanks for being with us. Great to be with your

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<v Speaker 1>Did I capture all of that that I that I

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<v Speaker 1>was able to put enough forward for you? To be

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<v Speaker 1>a little bit sort of jealous about our proximity to

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<v Speaker 1>the water. Well, it's it's very generous description of my background,

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<v Speaker 1>but I am definitely jealous of you, of you being

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<v Speaker 1>in Bermuer now, although I am I am actually in Newport,

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<v Speaker 1>Rhode Island, so very close to the water. Also, oh

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<v Speaker 1>all right, well then it's been very good. All right,

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<v Speaker 1>So success follows success. Um, it's how how can people

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<v Speaker 1>be successful using this Merlin large cap growth strategy in

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<v Speaker 1>order to perhaps eventually enjoy all of these good things? Well,

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<v Speaker 1>I think I think what it helps. It helps to

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<v Speaker 1>focus on the fundamental characteristics of the companies, and also

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<v Speaker 1>it helps to cut through through the incredible noise that

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<v Speaker 1>we have been experienced in the markets. I think, you know,

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<v Speaker 1>this is the end of the week where many of

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<v Speaker 1>the large retailers we reported pretty pretty horrific numbers, and

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<v Speaker 1>and I think everybody is questioning whether the consumers are dead,

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<v Speaker 1>whether retailers are dead. I think the consumers do not

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<v Speaker 1>appear to be dead. They are still spending, but they

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<v Speaker 1>are spending differently, which might very well bring bring very

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<v Speaker 1>unwelcome news to retailers, malls and sort of related businesses.

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<v Speaker 1>The the world is changing and you have to be

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<v Speaker 1>on your touse. You have to pay attention to what

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<v Speaker 1>you're investing in, and it's um and as I mentioned,

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<v Speaker 1>it is very difficult to keep focused on fundamentals, good

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<v Speaker 1>characteristics of companies that are still out there, that are

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<v Speaker 1>growing at the at the good pace and building their

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<v Speaker 1>businesses despite the slow economy. Well, your strategy very in

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<v Speaker 1>a very basic sense, is you select in one of

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<v Speaker 1>your funds the fifty most attractive large cat growth firms,

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<v Speaker 1>regardless of industry or sector. Uh, you've got a three

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<v Speaker 1>to five year outlook, use a comprehensive multi variant approach,

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<v Speaker 1>bottom up, topdown, contivacative evaluation, et cetera. Up Right, now,

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<v Speaker 1>do you have any big retailers in any of your

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<v Speaker 1>various funds or did you say handwrittings on the wall

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<v Speaker 1>department store chiefs are becoming dinosaurs, Kathy, It's a great question.

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<v Speaker 1>Retail retail business has been very, very tough, and I

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<v Speaker 1>see the primary reason for the retail business being being

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<v Speaker 1>difficult as Amazon. That Amazon is really just stealing their business.

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<v Speaker 1>And when you think about it, it's only represents about

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<v Speaker 1>Amazon only represents about seven percent of the of the

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<v Speaker 1>retail business right now, and it's already destroying companies like

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<v Speaker 1>we're like we have heard reporting this week. However, it

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<v Speaker 1>is possible to find the good retailers, but what I

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<v Speaker 1>would call them those are the retailers that haven't been

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<v Speaker 1>Amazon yet are very difficult for Amazon to to capture,

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<v Speaker 1>so I so I own some of them. They are

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<v Speaker 1>the example is Michael Stores uh and other examples are

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<v Speaker 1>are those um off price retailers like for example T

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<v Speaker 1>TJ Max, which I also owned for my clients. And

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<v Speaker 1>also the the building business. The home building has been

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<v Speaker 1>doing well, so I own laws and also on HDS

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<v Speaker 1>which is a spinoff from Home Home Depot that is

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<v Speaker 1>focused on on professionals, so they It is possible to

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<v Speaker 1>look look into retail and actually find good companies, but

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<v Speaker 1>it has been very, very difficult and really eliminates the

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<v Speaker 1>majority of the sort of traditional retail eage. Michael, what

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<v Speaker 1>kind of time horizon do you recommend that investors take

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<v Speaker 1>when they deploy this kind of strategy. Well, I look

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<v Speaker 1>at the companies when I choose them for the portfolios,

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<v Speaker 1>I look at about three to five years, so it's

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<v Speaker 1>you know, five years, it's probably questionable whether you can

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<v Speaker 1>really do it at such such period of time. But

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<v Speaker 1>I think one to three years, and one year is

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<v Speaker 1>probably two little, so I would say three years. It's

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<v Speaker 1>sort of the average what you should be looking at.

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<v Speaker 1>And uh, it's a on. All my strategies are fairly

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<v Speaker 1>low turnover strategies. The annualized turnover is about so once

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<v Speaker 1>they select the stuff, they tend to stay in the

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<v Speaker 1>portfolios for a fairly long period of time. How you

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<v Speaker 1>how you look at the come neat Apple? Now? You know,

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<v Speaker 1>in some sense you get so big, you get sure.

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<v Speaker 1>They had the big deal, right that a billion dollar investment,

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<v Speaker 1>indeed the largest It's like the Uber of China. Right, Um,

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<v Speaker 1>this deal led by Tim Cook really an interesting story.

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<v Speaker 1>But I remember Microsoft was just nobody like Microsoft? Right Microsoft?

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<v Speaker 1>See old and stodgy things. You're change to Microsoft. A

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<v Speaker 1>lot of people like that stock. Now, how do you

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<v Speaker 1>feel about companies like that and this this big mature

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<v Speaker 1>text space. Well, I have to tell you the the

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<v Speaker 1>A few years ago I was talking to San Francisco

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<v Speaker 1>to some of the scene at people about liking Microsoft,

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<v Speaker 1>and they were looking at me like I had a

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<v Speaker 1>third eye in the middle of my forehead and I

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<v Speaker 1>could see at that time, I could see changes happening

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<v Speaker 1>to Microsoft, and it took a few years for for

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<v Speaker 1>numbers to sort of show what they've been doing. So

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<v Speaker 1>it's um it's an interesting question. They are they are.

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<v Speaker 1>There's a benefit to large technology companies benefit or experience

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<v Speaker 1>and what they are able to do, but they have

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<v Speaker 1>to be able to change, and we have been seeing

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<v Speaker 1>some of those those old style tech companies changing. Microsoft

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<v Speaker 1>as a perfect example. Cisco is another example of a

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<v Speaker 1>company that is completely reinventing itself. Oracle might be another

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<v Speaker 1>one moving into the cloud. Apple Apple has been a

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<v Speaker 1>really frustrating company. I think a few years ago there

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<v Speaker 1>was a question, well was Apple really all about Steve?

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<v Speaker 1>And they had a deep bench, there were a lot

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<v Speaker 1>of people working with Steve, and at least so far,

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<v Speaker 1>I have to say that the answer is that it

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<v Speaker 1>was really all Steve. I have not been impressed with

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<v Speaker 1>Tim Cook. I've always said that he was a very

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<v Speaker 1>good CEO, but I don't see him as a good

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<v Speaker 1>leader of the company. I think the design is also lacking.

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<v Speaker 1>They haven't developed anything beyond what was Steep set them

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<v Speaker 1>to do. So it's a company that has still great potential.

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<v Speaker 1>I think they have. They just up there are and

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<v Speaker 1>the budget to about ten billion dollars or something better

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<v Speaker 1>come out of it. But right now was driven by

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<v Speaker 1>single product Keeno. More than six of our avenues are

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<v Speaker 1>based on an iPhone, and there was nothing else and

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<v Speaker 1>there's still nothing else on the horizon. At the same time,

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<v Speaker 1>Apple generates more cash than most of the technology companies combined,

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<v Speaker 1>so they it is very inexpensive. They are questions about

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<v Speaker 1>the growth. The company is still well well managed, isn't

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<v Speaker 1>going to return to growth? Those are the questions that

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<v Speaker 1>I'm struggling with. And I still own Apple, but I

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<v Speaker 1>would call it I still own Apple, rather than I

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<v Speaker 1>believe that I will own Apple for a long period

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<v Speaker 1>to come. Fascinating. Thank you so much for joining us.

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<v Speaker 1>And next time we come to Berne to maybe you'll

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<v Speaker 1>get your sailboat and race down. Okay, you're very much

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<v Speaker 1>great talking to Kathy and Fim. That's Dr Michael Obohovsky.

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<v Speaker 1>He's a founder Merlin Asset Management based in Boston. On

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<v Speaker 1>you heard him. He's the Newport Rhode Island. Today. A

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<v Speaker 1>lot of people on this Friday afternoon are on the

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<v Speaker 1>beach on anybody else is on quite a night speech

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<v Speaker 1>as uspn Elbow Beach Elbows Elo Beach Resort, I'm calfing

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<v Speaker 1>haze along with pin Fox ticking stock on Bloomberg Radio