WEBVTT - It's Like Nordstrom Without the Clothes 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.400 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com Nordstrom. Yesterday, 0:00:33.479 --> 0:00:37.360 the department store chain announced that it would open a 0:00:37.400 --> 0:00:41.040 new quote neighborhood hub shop. In other words, this is 0:00:41.080 --> 0:00:44.720 going to be a store that's smaller and has no merchandise, 0:00:45.040 --> 0:00:47.120 and they're going to open this on October three in 0:00:47.159 --> 0:00:50.920 West Hollywood, California. Did not go over well with investors. 0:00:50.920 --> 0:00:53.760 The shares fell about three on the news. And here 0:00:53.800 --> 0:00:57.520 to talk about this whole concept of window shopping with 0:00:57.560 --> 0:01:00.640 no merchandise that could be potentially the new front of 0:01:00.720 --> 0:01:04.240 retail is Punam Goyle. She is our own analysts that 0:01:04.319 --> 0:01:08.240 covers Senior. She's our own retail analyst for Bloomberg Intelligence 0:01:08.240 --> 0:01:11.480 and she joins us. Now, Punam, you know, I actually 0:01:11.520 --> 0:01:14.440 thought this was not a terrible idea kind of moves 0:01:14.480 --> 0:01:18.480 to the whole experience, kind of uh focus that a 0:01:18.480 --> 0:01:21.560 lot of retailers are looking to do. What's the problem here? 0:01:21.600 --> 0:01:25.000 What was what were investors responding so viscerally to? You know, 0:01:25.080 --> 0:01:27.399 I don't know if the response yesterday was to this 0:01:27.640 --> 0:01:31.000 directly or maybe something else, but I agree with you 0:01:31.080 --> 0:01:33.920 and I think it's actually a neat concept. It's one 0:01:34.000 --> 0:01:37.240 that more retailers should start thinking about how to drive 0:01:37.280 --> 0:01:40.119 people in their stores and how to shrink their stories. 0:01:40.520 --> 0:01:43.560 I mean, a three thousand square foot store versus their 0:01:43.640 --> 0:01:48.360 typical hundred and forty thousand square foot store, that's uh, 0:01:48.440 --> 0:01:51.480 you know, a big difference. And these three thousand square 0:01:51.560 --> 0:01:55.440 footstores can go anywhere. Well, and Punam, can you give 0:01:55.520 --> 0:01:58.600 us a sense of what these stores might look like, 0:01:58.720 --> 0:02:02.640 what the experience would be walking in for a customer? Sure? So, 0:02:02.680 --> 0:02:05.400 you know, you walk into these stores, you get a refreshment, 0:02:05.480 --> 0:02:08.280 whether it's beer, wine, coffee, whatever it is. You said, 0:02:08.840 --> 0:02:12.440 A personal stylist greets you. There's eight big dressing rooms. 0:02:12.840 --> 0:02:15.800 They talk to you, they understand what you like, and 0:02:15.800 --> 0:02:18.360 then they have you try on a few things, and 0:02:18.480 --> 0:02:20.960 whatever you like, you can either come back and pick 0:02:21.000 --> 0:02:23.800 it up later or it can be shipped directly to you. 0:02:24.360 --> 0:02:27.200 So they'll have merchandise there, but that merchandise is not 0:02:27.440 --> 0:02:31.960 for sale. Immediately you walk out bagless. I'm just trying 0:02:32.000 --> 0:02:34.840 to wrap my head around this punam. And I understand, 0:02:34.880 --> 0:02:38.040 you know, Lisa thinks it's not a terrible idea, that's 0:02:38.080 --> 0:02:43.080 a great endorsement. Um, But you know, drinking wine, personal tailors. 0:02:43.120 --> 0:02:45.880 How is all this scalable? How do you do this 0:02:45.960 --> 0:02:48.919 with a company that's a fifteen billion dollars in sales? 0:02:49.560 --> 0:02:51.720 You do it because you can have so many of 0:02:51.760 --> 0:02:54.119 these stores. So nord Storm is coming to New York 0:02:54.120 --> 0:02:58.440 City in full price store, a flagship store, a flagship store. 0:02:58.720 --> 0:03:00.680 So why can't and this is really you know, me 0:03:00.760 --> 0:03:03.440 thinking very out there. Why can't they add a three 0:03:03.480 --> 0:03:06.440 thousand square foot store in Soho and use the flagship 0:03:06.480 --> 0:03:08.920 store to fill that demand. They have a hundred and 0:03:08.960 --> 0:03:12.040 twenty two full line stores. They can go into major 0:03:12.080 --> 0:03:16.919 shopping destinations and add these smaller stores and use their 0:03:17.040 --> 0:03:20.000 hubs to fill the demand. So totally, I actually I 0:03:20.040 --> 0:03:22.079 totally see this, PIM because if you think about it, 0:03:22.360 --> 0:03:25.160 I enjoy a glass of wine. I want to talk about, 0:03:25.200 --> 0:03:27.399 you know, what the latest trends are, and try things 0:03:27.440 --> 0:03:29.280 on and make sure things fit all right before you 0:03:29.400 --> 0:03:31.720 order it online. And uh, you know, not only that, 0:03:31.760 --> 0:03:35.480 but putam, is there any discussion about creating other aspects 0:03:35.480 --> 0:03:37.720 of the experience. I mean, I know that like, for example, 0:03:37.760 --> 0:03:40.880 the M and M store in Times Square had a 0:03:41.000 --> 0:03:45.440 very kind of playful environment, or the old fo Schwartz 0:03:45.600 --> 0:03:50.560 with the the clock and the how did that do? Yeah, 0:03:51.680 --> 0:03:54.920 and just but that's okay. Well no, I was gonna say, 0:03:55.280 --> 0:03:57.400 you know, to go back to your point about you know, Okay, 0:03:57.440 --> 0:03:59.839 so that norths To opens the flagship store in New York, 0:03:59.840 --> 0:04:02.840 and so they're going to do a smaller square foot 0:04:02.880 --> 0:04:06.600 maybe a five thousand, three thousand square foot store in Soho. Well, 0:04:06.640 --> 0:04:08.200 the reason they're not going to make any money there 0:04:08.240 --> 0:04:10.880 is because it costs four point three million dollars a 0:04:10.960 --> 0:04:13.960 year for a five thousand square foot storefront in Soho. 0:04:14.080 --> 0:04:17.880 It's expensive. Everywhere you want to go, it is expensive. 0:04:17.960 --> 0:04:20.320 But just think about the traffic that they get into 0:04:20.320 --> 0:04:22.200 those stories and the sales they can get out of 0:04:22.240 --> 0:04:24.480 that three thousand square foot box. I mean, look, I 0:04:24.520 --> 0:04:26.400 don't know exactly what these stores are gonna look like, 0:04:26.440 --> 0:04:27.960 but I would be more than happy to go in 0:04:28.000 --> 0:04:30.960 for a petty manny and um, look for some clothes 0:04:30.960 --> 0:04:33.039 while I'm doing that, and try him on, and then 0:04:33.200 --> 0:04:35.200 walk out and have it sent to my home and 0:04:35.320 --> 0:04:37.159 walk out without a bag because you don't want to 0:04:37.160 --> 0:04:39.520 carry a bag everywhere you go anymore. For all the 0:04:39.520 --> 0:04:42.240 men out there, a manny petty is a manicure pedicure. 0:04:42.240 --> 0:04:44.320 And I agree with you, But I also think that 0:04:44.360 --> 0:04:46.680 there has to do uh there there There has to 0:04:46.720 --> 0:04:49.720 be an advertising element of this as well, right, I mean, 0:04:49.720 --> 0:04:51.599 if you think about at the four point three million 0:04:51.640 --> 0:04:54.400 dollars that it costs to have that space, if they 0:04:54.440 --> 0:04:57.280 have incredible foot traffic, if they have an experience that 0:04:57.360 --> 0:04:59.320 gets the word at the word out, that seems to 0:04:59.320 --> 0:05:03.840 be a destination for people, I mean, that's that's advertising. 0:05:03.839 --> 0:05:06.360 That's worth it for them, right. Yeah. Not every three 0:05:06.360 --> 0:05:08.760 thousand square foot store will cost them that much money. 0:05:08.760 --> 0:05:11.599 I mean there are other areas, densely populated areas that 0:05:11.640 --> 0:05:14.640 they could go into with these smaller footprints that maybe 0:05:14.640 --> 0:05:18.080 don't cost that much money. All right, So let's let 0:05:18.480 --> 0:05:22.440 all kidding aside. Though, how many do they intend to have? 0:05:22.480 --> 0:05:25.000 Any idea how many of these new kinds of formats 0:05:25.000 --> 0:05:28.880 do they intend to open? And what precludes the competition 0:05:29.000 --> 0:05:32.279 from opening another small three thousand square foot space right 0:05:32.320 --> 0:05:36.359 next door. So so far one, Um, no announcements of 0:05:36.360 --> 0:05:39.599 anything further than that. There maybe one in Toronto, but UM, 0:05:39.720 --> 0:05:42.599 it's just you know, they haven't announced anything further. I 0:05:42.600 --> 0:05:45.520 think they're going to test and try, see how it goes, 0:05:45.760 --> 0:05:49.159 and then we'll hear more. As far as competition, why not, 0:05:49.400 --> 0:05:53.720 I mean, why isn't everyone thinking of something similar or different? 0:05:53.760 --> 0:05:56.160 We saw colds just uh, I think over a week 0:05:56.200 --> 0:05:59.960 ago announced at Amazon coming intent of their stores to showcase, 0:06:00.000 --> 0:06:03.520 ace test and try Amazon branded goods. So people are 0:06:03.600 --> 0:06:06.120 thinking retailer, they're thinking outside the box. They're trying to 0:06:06.120 --> 0:06:10.640 find ways to drive traffic and use the box more productively. Well, 0:06:10.680 --> 0:06:12.760 I think that it's fascinating. And I imagine that they'll 0:06:12.760 --> 0:06:16.360 also have people who help, uh style different outfits and 0:06:16.360 --> 0:06:18.200 looks for people, so there'll be more of that kind 0:06:18.240 --> 0:06:21.080 of tailor experience as well. Right, Yeah, and then and 0:06:21.080 --> 0:06:22.800 then you get a fitted to. They have a tailoring 0:06:22.839 --> 0:06:25.360 service on siting. I mean that's just you know, one 0:06:25.400 --> 0:06:28.480 stop shop if you're a north Strom shopper or our 0:06:28.800 --> 0:06:31.599 north Strom potential shopper that you know would be interested 0:06:31.640 --> 0:06:34.960 in clothes from the ore Shoes put them Goyle, thank 0:06:34.960 --> 0:06:36.440 you so much for joining us. Put him. Goyle, a 0:06:36.440 --> 0:06:40.240 senior retail analyst for Bloomberg Intelligence, talking about this new 0:06:40.360 --> 0:06:46.000 window shopping no merchandise store concept and uh, it's interesting. Nonetheless, 0:06:46.040 --> 0:06:48.479 it's interesting to see retailers think outside the box and 0:06:48.520 --> 0:06:51.880 try to uh come up with new experiences in a 0:06:51.920 --> 0:07:07.080 time when people really do order so much online. Mark 0:07:07.160 --> 0:07:09.760 Usco has had some harsh words for certain e t 0:07:09.920 --> 0:07:13.360 F s. He called one slice of the funds one 0:07:13.400 --> 0:07:16.960 of the worst things ever created. Now he's starting his 0:07:17.000 --> 0:07:19.680 own e t F. Marc Usco joins us now Marcusco 0:07:19.720 --> 0:07:23.000 as chief executive officer and chief investment officer of Morgan 0:07:23.040 --> 0:07:25.920 creekt Capital Management, which oversees almost three billion dollars in 0:07:26.000 --> 0:07:30.400 Chapel Hill, North Carolina. Mark, So, what convinced you to 0:07:30.880 --> 0:07:34.080 plow into this territory that you've had such criticism for 0:07:34.920 --> 0:07:37.840 about in the past few years. Well, at Lisa, you know, 0:07:37.880 --> 0:07:41.000 I think it's important to note that I've actually never 0:07:41.040 --> 0:07:45.120 been a critic of E t F as a structure. Yeah, 0:07:45.120 --> 0:07:47.280 I think I think DTF structure is is quite a 0:07:47.280 --> 0:07:50.120 good one. What I was critical of is is certain 0:07:50.200 --> 0:07:52.560 strategies and the one that I did call, you know, 0:07:52.600 --> 0:07:56.720 maybe the worst invention perpetuated against investors in a long time. 0:07:56.760 --> 0:08:00.640 With this idea of low volatility, where you buy stock 0:08:01.040 --> 0:08:04.280 only based on the volatile e of its price, no 0:08:05.360 --> 0:08:09.040 regard to fundamentals, no regard to how the company performs. 0:08:09.360 --> 0:08:11.920 It seems like a really bad idea to buy something 0:08:11.960 --> 0:08:14.080 no matter what the prices and whatever the value is. 0:08:14.600 --> 0:08:17.440 So the structure of ets IS is a really good one, 0:08:17.480 --> 0:08:20.040 and I think the biggest reason for us to to 0:08:20.280 --> 0:08:23.920 kind of crossover is we've been involved in the alternatives 0:08:23.960 --> 0:08:27.600 world for a very long time, and that basically meant 0:08:27.600 --> 0:08:30.200 that the SEC said, you know, if you weren't wealthy, 0:08:30.480 --> 0:08:34.040 you couldn't have access because of all the restrictions against 0:08:34.040 --> 0:08:37.000 the credited investors and qualified purchasers. So this is the 0:08:37.040 --> 0:08:40.040 way to bring our styles and strategies that we think 0:08:40.080 --> 0:08:43.640 are really good ways to manage capital, honed in our 0:08:43.720 --> 0:08:48.640 endowment experience, into the world of the average investor. So, Mark, 0:08:48.720 --> 0:08:52.200 will this exchange traded fund? Will it be passive or active? 0:08:53.200 --> 0:08:55.760 It'd be active, And I think that's a really important point, 0:08:55.960 --> 0:08:59.800 you know, although I get kind of buggy on this 0:09:00.040 --> 0:09:03.839 on this word to PIM and that the word passive 0:09:04.640 --> 0:09:08.240 is kind of a misnomer and that these things aren't passive, right. 0:09:08.320 --> 0:09:10.880 You know, most of the stocks in the sp SP 0:09:11.480 --> 0:09:14.600 weren't there thirty years ago. There's been I think turnover. 0:09:15.200 --> 0:09:19.479 It's just slow active and they're really momentum based strategies 0:09:19.520 --> 0:09:22.600 because of the capitalization waiting in most of these index ones. 0:09:23.160 --> 0:09:25.079 So I don't really like the term passive, but you 0:09:25.120 --> 0:09:28.680 know passive is indexing, and that all the other things. 0:09:28.720 --> 0:09:30.719 This will definitely be active in the sense that it's 0:09:30.720 --> 0:09:33.880 going to take our best ideas that we come up 0:09:33.920 --> 0:09:37.280 with once a year in our our primary themes, and 0:09:37.320 --> 0:09:41.680 then trade within the year around those those best ideas 0:09:41.720 --> 0:09:44.679 and try to deliver. You know, we think alpha because 0:09:44.679 --> 0:09:47.720 to us, alpha is smart. You know, there's this whole 0:09:47.760 --> 0:09:52.199 thing called smart beta. Beta actually is dumb, not meaning unintelligent, 0:09:52.240 --> 0:09:54.880 but it's rule based. Alpha is where the smart part 0:09:54.880 --> 0:09:58.160 of asset management is. So mark you set the best 0:09:58.200 --> 0:10:01.880 ideas once a year. Correct, Yes, those are the big themes, 0:10:01.880 --> 0:10:05.160 so kind of ten big themes that we think have 0:10:05.640 --> 0:10:07.760 you know, about a fifty fifty chance of happening. But 0:10:07.840 --> 0:10:11.680 if they do happen, they'll present up you big upside 0:10:11.679 --> 0:10:13.800 return opportunities. You know, this year, a good example would 0:10:13.800 --> 0:10:17.200 have been short the dollar. Everybody thought the dollar was 0:10:17.200 --> 0:10:20.079 going up this year. In fact, of those surveyed on 0:10:20.200 --> 0:10:22.719 Bloomberg and other places thought the dollar was going up. 0:10:22.920 --> 0:10:24.400 So if you were short the dollars this year, you've 0:10:24.440 --> 0:10:25.680 made a lot of money. And if you were long 0:10:25.720 --> 0:10:27.960 the rem and B, which was the opposite of what 0:10:28.000 --> 0:10:31.360 most people were doing last year. So Mark, currently, what's 0:10:31.400 --> 0:10:35.640 one of your best ideas? So you know, well, short 0:10:35.679 --> 0:10:37.600 the dollars is still you know, one of our our 0:10:37.640 --> 0:10:41.360 top ten ideas. Uh. We also like the idea that 0:10:41.480 --> 0:10:44.080 that interest rates are going to continue to go down, 0:10:44.520 --> 0:10:47.520 not up. Uh. You know, everybody thought interest rates we're 0:10:47.559 --> 0:10:50.520 gonna rally really hard after the Trump victory, and and 0:10:50.559 --> 0:10:52.839 they did for a few weeks. And they started the 0:10:52.920 --> 0:10:55.360 year at two sixty an hour down to to sixteen. 0:10:55.400 --> 0:10:58.679 And that's a surprise to everybody. But are probably our 0:10:58.679 --> 0:11:02.760 biggest one is this wealth transfer from the developing world. 0:11:03.240 --> 0:11:06.560 Two I started from the developed world to the developing world. 0:11:06.840 --> 0:11:09.320 And we think emerging markets are are going to continue 0:11:09.360 --> 0:11:11.120 to be the place to be. They're gonna have a 0:11:11.160 --> 0:11:14.600 decade of dominance for the next ten years. And while 0:11:14.640 --> 0:11:16.560 we think the US market is going to struggle to 0:11:16.600 --> 0:11:20.640 make any return, um basically be flat for a decade, 0:11:20.679 --> 0:11:22.319 just like from two thousand to two thousand and ten, 0:11:22.840 --> 0:11:25.440 we think emerging markets could could compound in the high 0:11:25.440 --> 0:11:28.560 single digits, even low double digits. Hey, Mark, what happens 0:11:28.600 --> 0:11:32.400 if one of these ideas goes bust? Well, you know 0:11:32.840 --> 0:11:34.520 they will, right, I mean, we're not gonna get them, 0:11:34.559 --> 0:11:36.520 all right. Uh, And that's why it's going to be 0:11:36.520 --> 0:11:40.160 an actively managed et F. It's great question. Um, so 0:11:40.200 --> 0:11:42.520 that you know, we we think one of the strengths 0:11:42.640 --> 0:11:45.520 of of the endowment model. You know we've lived our 0:11:45.559 --> 0:11:48.480 our whole careers is is the risk management. Focus on 0:11:48.600 --> 0:11:53.000 risk management, focus on protection of capital first, growth of capital. Second. 0:11:53.440 --> 0:11:54.880 You know, if you take care of the losses, the 0:11:54.920 --> 0:11:58.960 gains take care of themselves. The stop loss on each 0:11:59.000 --> 0:12:00.959 of the positions. I mean, do you say to yourself, 0:12:01.000 --> 0:12:03.200 all right, if this is that, if this goes down 0:12:03.240 --> 0:12:06.440 more than seven in the next six months, I'm out 0:12:06.440 --> 0:12:10.120 of here. Again, really important question. We don't we don't 0:12:10.200 --> 0:12:14.360 like those rules based stop losses because what we think 0:12:14.400 --> 0:12:17.840 that does is is it. It tends to what people 0:12:17.880 --> 0:12:20.240 do is they buy high and they sell low. We 0:12:20.440 --> 0:12:23.760 rather try to only buy things when there's a margin 0:12:23.800 --> 0:12:27.559 of safety, so that some decline in price is actually 0:12:27.880 --> 0:12:29.880 okay and actually gives you an opportunity to buy more 0:12:29.920 --> 0:12:33.080 of something as long as you're below fair value. So 0:12:33.360 --> 0:12:35.840 you know, if it turns out that you you know, 0:12:35.880 --> 0:12:38.880 made a miscalculation on fair value or you know, just wrong, 0:12:39.000 --> 0:12:41.320 or the trend changes, you know, then you've just got 0:12:41.320 --> 0:12:43.040 to step to the side. And that that's really more 0:12:43.040 --> 0:12:46.040 of a judgment call. And that's where I think the 0:12:46.040 --> 0:12:48.960 difference between active management and passive management really comes to 0:12:49.040 --> 0:12:53.360 bears is the whole concept of judgment. Passive has no judgment. 0:12:53.360 --> 0:12:57.080 It's not allowed to have judgment. It has to buy whatever. 0:12:57.360 --> 0:12:59.000 You know, the rule says it's going to buy no 0:12:59.040 --> 0:13:01.280 matter what the price, no matter what the value. Well, 0:13:01.280 --> 0:13:03.240 we're gonna see what happens, right, We're gonna see where 0:13:03.240 --> 0:13:05.360 your et F is gonna come out, and we'll we'll 0:13:05.440 --> 0:13:07.720 check in with you to see whether this new uh 0:13:07.760 --> 0:13:11.360 sort of actively managed e t F will grow to 0:13:11.440 --> 0:13:14.520 fruition as you describe. Thanks very much, Mark Usko, Chief 0:13:14.520 --> 0:13:18.160 Executive Officer, and Chief Investment Officer, Morgan Creek Capital Management. 0:13:29.880 --> 0:13:32.160 I want to bring in John Butler to learn more 0:13:32.280 --> 0:13:35.480 about the Apple launch. John, in your world, is this 0:13:35.720 --> 0:13:38.640 you know? Is this like Christmas, Thanksgiving and I don't know, 0:13:38.720 --> 0:13:41.120 New Year's all rolled into one. Well, it's a big 0:13:41.200 --> 0:13:44.360 Christmas this year, PIM because we get an extra iPhone 0:13:44.480 --> 0:13:48.400 under the tree. Um, Apple for the first time in 0:13:48.440 --> 0:13:51.600 a long time, is coming out with a product line extension, 0:13:52.000 --> 0:13:54.640 and it's a perfect year to do it because it 0:13:54.800 --> 0:13:59.120 is the tenth anniversary of the iPhone. The latest rumor 0:13:59.160 --> 0:14:01.079 and there have been a lot rumors about what it's 0:14:01.080 --> 0:14:03.280 going to be called, but apparently it's it's going to 0:14:03.360 --> 0:14:07.199 be called the iPhone ten and Um it's at the 0:14:07.320 --> 0:14:09.200 very high end of the market, so a lot of 0:14:09.200 --> 0:14:12.080 people are talking about the high price, the thousand dollar 0:14:12.240 --> 0:14:16.320 plus price point. But I think I think it comes 0:14:16.360 --> 0:14:20.640 with a pretty significant redesign. They're taking the home button off. 0:14:21.040 --> 0:14:24.960 It's a LED screen, so which are beautiful screens by 0:14:25.000 --> 0:14:28.560 the way, Samsung uses O lead and you get black 0:14:28.640 --> 0:14:32.960 or blacks and whiter whites. Um, and it's gonna be 0:14:33.000 --> 0:14:37.440 a large screen, larger than the iPhone seven plus by 0:14:37.480 --> 0:14:42.480 about point three inches, so they're the screen sizes are 0:14:42.480 --> 0:14:44.800 getting up there, and I think Apple is positioning it 0:14:44.880 --> 0:14:49.320 to compete with Samsung's new Note eight, which has actually 0:14:49.520 --> 0:14:52.040 had a lot of demand for that, so it seems 0:14:52.040 --> 0:14:54.080 like they have some stiff competition. It does, and it's 0:14:54.120 --> 0:14:57.160 priced at n fifty dollars, so it's at a similar 0:14:57.520 --> 0:15:00.440 price point. It's discounted basically, right. But you know, John, 0:15:00.520 --> 0:15:03.560 I'm sorry, I personally have this visceral reaction to the 0:15:03.600 --> 0:15:08.080 frenzy that Apple is able to whip everyone up into. 0:15:08.200 --> 0:15:12.400 Can any other company creates such a glut of just 0:15:13.200 --> 0:15:17.160 natural advertising, just everyone talking Apple phone, Apple phone, Apple 0:15:17.160 --> 0:15:20.440 phone all the time? I mean, why is there such 0:15:20.560 --> 0:15:24.360 an excitement over this? The roots are in Steve Jobs. 0:15:24.480 --> 0:15:28.960 Like Steve Jobs, you know, with the initial iPhone announcement 0:15:29.040 --> 0:15:33.080 ten years ago, that was really something. I mean, it 0:15:33.200 --> 0:15:36.800 was a brand new device. He had basically taken what 0:15:36.960 --> 0:15:40.040 was up to that point a consumer electronics device and 0:15:40.080 --> 0:15:44.160 turned it into this appealing accessory. And in the years 0:15:44.160 --> 0:15:47.320 that followed, of course Jobs did a great did a 0:15:47.440 --> 0:15:52.760 tremendous job, no pun intend. Well, do you think that 0:15:52.840 --> 0:15:57.920 this new iPhone will elevate the product to a new level, 0:15:58.120 --> 0:16:01.680 so they can even be considered a somewhat new innovation, right, 0:16:01.680 --> 0:16:03.760 because that's that's been one challenge for Apple is that 0:16:03.800 --> 0:16:07.440 they really haven't come up with a new hit. They 0:16:07.480 --> 0:16:09.360 have not come up with a new hit. What they're 0:16:09.400 --> 0:16:13.920 looking to do, Lisa is broaden the category a little bit. 0:16:14.000 --> 0:16:16.320 So they're going to the ultra high end. There are 0:16:16.160 --> 0:16:19.320 a premium phone player, but they've never had a true 0:16:19.400 --> 0:16:24.400 match for the Note Samsung Note eight now um, and 0:16:24.480 --> 0:16:27.040 so I sort of view this as an important event 0:16:27.040 --> 0:16:30.440 because you're getting in a typical refresh by the way 0:16:30.480 --> 0:16:33.920 you get to new phones. We're now getting three, including 0:16:33.960 --> 0:16:37.480 this high end phone. So I think it's a big deal. 0:16:37.640 --> 0:16:40.280 And I think all the excitement is reflective of the 0:16:40.400 --> 0:16:43.000 power of the Apple brand. They really do have a 0:16:43.160 --> 0:16:46.840 great global brand. Yeah, they also know how to leverage it. 0:16:46.920 --> 0:16:48.520 I was gonna say, they also do two hundred and 0:16:48.880 --> 0:16:52.280 three billion dollars in sales a year, So do anything 0:16:52.360 --> 0:16:54.520 that a company of that size does, you're gonna want 0:16:54.520 --> 0:16:56.640 to pay attention to it. So the challenge now for 0:16:56.680 --> 0:16:59.600 Apple is they need to go from hardware innovations to 0:16:59.680 --> 0:17:02.720 can tell people to upgrade the more software and so 0:17:02.800 --> 0:17:06.119 what I'm looking for in today's event is what are 0:17:06.160 --> 0:17:09.280 we getting in the way a new content, new services, 0:17:10.200 --> 0:17:13.800 um adjacent product markets. I hear we're getting a new 0:17:13.800 --> 0:17:17.040 watch that is going to be completely free of the iPhone, 0:17:17.080 --> 0:17:20.240 which this one will tell time terrific. It may tell time. 0:17:20.400 --> 0:17:23.960 That's we'll see what I mean. I mean, I understand 0:17:24.000 --> 0:17:26.919 this whole you know ecosystem with Apple and so on, 0:17:27.200 --> 0:17:29.400 But I I thought that the challenge that Apple really has, 0:17:29.440 --> 0:17:31.560 never mind the one thousand dollar price tag, but is 0:17:31.600 --> 0:17:35.439 getting people in China to buy their products. It's getting 0:17:35.440 --> 0:17:38.560 people in China, which is matured, and now it's getting 0:17:38.960 --> 0:17:42.600 in India, which I think is a long shot. We 0:17:42.640 --> 0:17:46.040 did a report taking a close look at that market. 0:17:46.080 --> 0:17:48.720 The monster portion of that market is at the low 0:17:48.880 --> 0:17:52.320 end price below two fifty dollars. I think Apple doesn't 0:17:52.520 --> 0:17:55.159 stand a chance personally. But you know, it's interesting that 0:17:55.200 --> 0:17:57.919 you focus on content. I wonder how much of this 0:17:58.040 --> 0:18:02.919 is also geared at creating customer data. There's been a 0:18:02.920 --> 0:18:07.120 lot of talk about one big benefit that Google and 0:18:07.240 --> 0:18:10.760 Facebook have over Apple and the long term is that 0:18:10.800 --> 0:18:15.440 they have amazing access to all of the customer data. 0:18:15.640 --> 0:18:20.200 Amazon also, where's Apple in this nowhere yet. But that's 0:18:20.240 --> 0:18:23.280 where the content comes in, right, because if you're producing 0:18:23.400 --> 0:18:27.920 original programming, or even if you're not producing your own programming, 0:18:28.400 --> 0:18:31.560 you can benefit from the ad dollars and targeted ad 0:18:31.560 --> 0:18:34.760 dollars at that based on what you know about your 0:18:34.880 --> 0:18:38.439 user base. So when you heard Verizon originally give the 0:18:38.520 --> 0:18:42.880 hard sell on leveraging content at A O, L and Yahoo, 0:18:43.119 --> 0:18:45.840 they were talking about leveraging what they know about their 0:18:45.880 --> 0:18:49.159 wireless customers, A T and T is probably going to 0:18:49.240 --> 0:18:51.320 do the same thing, and Apple is in a great 0:18:51.359 --> 0:18:55.639 position to do the same. So again I'm looking for 0:18:55.840 --> 0:19:02.480 new a new maybe streaming video service coming this afternoon. Um, 0:19:02.600 --> 0:19:05.239 they've made some big hires out of Sony, so they 0:19:05.280 --> 0:19:08.880 have a great content team. Where's it going now, that's 0:19:08.920 --> 0:19:10.840 the big question. Just to follow up on what you 0:19:10.840 --> 0:19:13.080 said about A T and T and Verizon, the chief 0:19:13.119 --> 0:19:15.920 executive of A T and T, Randall Stevenson, today saying 0:19:16.240 --> 0:19:18.720 expect the time, want to deal to close by the 0:19:18.880 --> 0:19:21.760 end of the year. And oh yes, if you're interested 0:19:21.880 --> 0:19:26.560 in HBO, it'll be free to all wireless customers that 0:19:26.680 --> 0:19:30.399 have an unlimited plant. So there that's an answer to 0:19:30.560 --> 0:19:34.000 T Mobile coming out the other day giving free Netflix 0:19:34.040 --> 0:19:38.400 to people, and so, not to go off on a tangent, 0:19:38.440 --> 0:19:40.000 but with the talent, But that's the same kind of 0:19:40.000 --> 0:19:42.200 thing you're talking about with Apple. Yeah, it's okay, you 0:19:42.280 --> 0:19:45.200 got the device, you're gonna need the content. Yeah. For 0:19:45.240 --> 0:19:48.560 the telcos, they're dealing with the same market maturity, and 0:19:48.600 --> 0:19:51.959 it's led to pricing pressure and wireless. How low can 0:19:52.000 --> 0:19:54.679 you go on price before you hurt yourself? And what 0:19:54.720 --> 0:19:59.000 do you do instead? You add value to that commoditized 0:19:59.040 --> 0:20:02.080 service and their owing it with content And so a 0:20:02.200 --> 0:20:04.840 T and T is merely responding to what T Mobile 0:20:04.880 --> 0:20:08.639 did by giving Netflix away for free for T Mobile 0:20:08.680 --> 0:20:11.480 one subs on family plants. How far away are we 0:20:11.560 --> 0:20:16.119 from peak content? I don't cover content, so that's a 0:20:16.160 --> 0:20:18.600 tough call, but it's something I'm watching. It's getting to 0:20:18.600 --> 0:20:22.680 be an awfully crowded market. But it's interesting to see 0:20:22.720 --> 0:20:25.680 where content is going. It's moved from long form sit 0:20:25.720 --> 0:20:27.639 in front of the TV in your living room and 0:20:27.720 --> 0:20:30.879 watch it for an hour, to short form watching it 0:20:30.960 --> 0:20:34.240 on a smartphone. So in that sense, the ball is 0:20:34.320 --> 0:20:37.120 moving into Apple's court, not away from it. Yeah, we're 0:20:37.119 --> 0:20:38.800 all a d D now, John Butler, thank you so 0:20:38.880 --> 0:20:41.200 much for joining us. Always a pleasure to speak with you. 0:20:41.280 --> 0:20:44.640 John Butler has senior Telecom Services and Equipment analyst for 0:20:44.800 --> 0:20:49.280 Bloomberg Intelligence, talking all things Apple, Apple, Apple, Apple, the 0:20:49.280 --> 0:21:04.800 new iPhone. Let's turn our attention now to infrastructure and 0:21:04.920 --> 0:21:09.080 utilities when it comes to the aftermath of Hurricane Irma. 0:21:09.320 --> 0:21:12.879 Joining us as Kit Connledge, he is our senior Industrials 0:21:12.920 --> 0:21:16.480 and Utilities analysts for Bloomberg Intelligence. He joins us here 0:21:16.480 --> 0:21:19.640 on our eleven three oh studio. Kit, thanks for coming in. 0:21:19.920 --> 0:21:22.239 Maybe just give us an update. I was looking at 0:21:22.240 --> 0:21:24.640 some headlines that said that about six and a half 0:21:24.840 --> 0:21:28.960 million customers are without electricity, but you brought your spreadsheets 0:21:29.440 --> 0:21:32.359 and you've got more detailed. Well, the it looks to 0:21:32.400 --> 0:21:35.840 me like the latest from the grid operator in Florida, 0:21:36.440 --> 0:21:39.240 UH indicates that we're damned to about five and a 0:21:39.280 --> 0:21:44.760 half million outages now. So uh, they're obviously getting to 0:21:44.880 --> 0:21:47.280 the low hanging fruit first, let's put it that way. 0:21:47.320 --> 0:21:51.360 So the further south you were, the quicker the hurricane 0:21:51.359 --> 0:21:55.640 went through. So those guys are getting fixed now pretty readily. 0:21:56.040 --> 0:21:58.120 Presumably the keys are going to have a hard time 0:21:58.160 --> 0:22:00.960 getting fixed, but there's not that many electric connections and 0:22:01.040 --> 0:22:05.720 the keys. So um as you fix up Marco Island 0:22:06.000 --> 0:22:09.760 and up the west coast than FPL completes this, it's work. 0:22:09.840 --> 0:22:14.399 But the North Central Florida, Florida Power and Light is 0:22:14.480 --> 0:22:18.120 the one and North Central Florida, where Duke Power Florida 0:22:18.400 --> 0:22:23.200 is has still a higher percentage of their outages remaining. 0:22:23.960 --> 0:22:26.120 Can you give us a sense of the scope of 0:22:26.200 --> 0:22:28.439 what it will take to get power online. Are we 0:22:28.480 --> 0:22:30.679