Apple Eyes Satellites As Way To Beam Data To Devices

Bloomberg dot com. Well, it doesn't look like we are getting something from Apple when it comes to satellites and the infrastructure that they're creating in order to have faster, better, more reliable access. Uh sure. Overd is here shrug in her shoulders, making some interesting faces. She's a she's a calmness covering tech. This is radio. Actually not think it is. Honestly like these are These are fantastic expressions and sort of say everything that you need to say. You're dubious. Okay,

just hold on a second. Just just buy your shrug and the face that you just made. Bloomberg opinion columnist Shia Overday. My guess is at your take on this is that it's a and this guy kind of investment that is something that they can do with their oodles

of cash. And that seems feasible. Uh maybe, yeah, So I think that my reason for the shrugging is that there are a lot of companies working on UM what are called kind of low Earth orbit satellites UM that are in theory will be used to provide better or more available mobile internet service. So, you know, Jeff Bezos, both Amazon and his Blue Origin Space company are working on a project. So it's SpaceX, the Elon Musk company. There's a number of smaller startups like one Web that

are also working on these projects. And the idea seems cool, right. It's that right now, providing mobile internet it requires a lot of physical infrastructure on the ground, right you have cell phone towers and all these base stations, and as we move into a five G world, there's going to be even more of these nests sary UM to kind

of provide efficient and reliable mobile internet. And so the idea is that we can fire a whole bunch of satellites into space that may be a more effective solution to provide mobile internet, particularly in places that are rural or remote, either in the developing world or in places like the Arctic or Alaska or rural Iowa or whatever.

But it's gonna be it's gonna be very expensive, and it's gonna take a very long time, and there's legitimate questions about whether any of this stuff is technologically feasible. It's interesting, and we also saw today with the Boeing launch and then the failure to reach the space station. The satellite business is a tough business. Uh. There's a lot of failed satellite companies out there, and there's a lot of bond holders out are holding on the paper

and they're really concerned. There's spaces literally littered with failed satellites up there. If your Apple is I guess the question a lot investors have is because I think the surprise a lot of investors is is it better to kind of do it yourself or just kind of outsourced. I guess yeah, it's a very good point, and you're right there. There are a lot of failed satellite companies out there, including satellite broadband companies. So we'll see how

this progresses. On the other hand, look, we do want companies, particularly companies like Apple that throw off lots of cash to invest in put in promising future projects. And we talked about earlier with Amazon. Right, we've seen the investments they've made in their infrastructure with things like warehouses and their delivery operation that that has really paid dividends in transforming the company and getting packages to people's homes faster. I have a crazy idea, and we were talking about

this John Butler of Bloomery Intelligence earlier. Why does an Apple with its crazy billads of cash just by a T and T by Verizon? Okay, I mean it's a look,

it's a totally it's a totally fair question. And look, we did see we have seen circumstances in the past where Google they did not buy one of the telecom companies, but they did have their own um Internet and cable television company, which they have significantly scaled back because they felt that they couldn't really make it work on a large scale the way that you know, the sort of comcasts and A T and T s of the world make it work. It'since I'm looking at the A T

and T. I'm sorry. The Apple shares fifty two week high today, uh stocks up seventy percent year to date, market cap of one and a quarter trillion dollars share. It just seems like whatever they're doing, shareholders just love it. So I guess the big issue for this company has been can it pivot from a phone only company, hence it only company, to a more of a diversified services company. Looks like the market saying yes, I think that's right, and the market is saying yes, I certainly have doubts

about whether that transformation is real. Um it is. It is very interesting to look at what Apple is spending money on. So this is a company that has, as a share of revenue, tripled their expenditure on research and development the last five years. That Apple, for a tech company, is still spending a relatively small share of their revenue, about six percent of their revenue on research and development projects.

So that's everything from the stuff that is going into phones right now to these kind of future satellite projects and augmented reality glasses and driverless cars and whatever comes next. So I think investors have been very willing to be patient on seeing some of those longer term projects payoff. It is right now affecting Apple's profit that you see the profit margin at Apple has gone. The operating profit margin used to be five years ago and now it's

twenty four percent. It's at the lowest level. It's been in a decade and one big reason for that is this heavy spending on research and development. Yeah, I know exactly. It's fair enough. It is still a massively profitable company. Thanks so much for joining a shore of a Bloomer Opinion technology commas. You can read all of her work and all the other great work done by our folks at Bloomberg Opinion, at Bloomberg dot com, slash opinion or on the terminal op I n go. They do fantastic work.

Really give me, I think, unique views into a lot of industries, a lot of companies, a lot of the news items going on UH, and they're really well informed. And I heard you to read that Bloomberg Opinion work. Outstanding stuff on the terminal end on the website. Well, a year ago today, where were we A year ago today? We were down, you know, close to the markets. Were doing that. You're doing exactly what Tom Kane does exact day because he's not here, so you're you know, so

I am doing it. What a difference of year makes a year ago? Our next guest kim In Peter Kenny, founder of the Strategic Board Solutions UH and Kenny, a company he was in this studio a year ago, saying things aren't so bad. Let's get constructive. Peter Kenny, thanks so much for joining us. Where do you stand now? You boy? You a you were super right? Thank you? What do we do now? Do you think? You know? It's been a great year. I kind of expected this pretty much more or less to the point on the

SMP five. I'm still very constructive, believe it or not, in spite of the fact that we've just seen a gain for the SMP five this year. I'm still constructive, but much more modestly so. So instead of the tent that we saw this year, I'm looking at maybe between six and nine percent next year. May get us to

by the end of the year. The reason why I'm still constructive in spite of the fact that we've seen a gain is because we have very low interest rates, great economic data, clear signs of re engagement in terms of growth in the U. S. Economy, great news and the trade front, and consumer sentiment, income employment. This stuff is just super strong, and I think that we're going to continue to see that. You know, the tide lift all right, Peter, there's a difference between six or nine

percent returns that steadily get developed over the year. That seems to be different than what people think is going to happen, where it's going to be front load in the front half of the year and the back half is going to be kind of rough based on political uncertainty. Would you agree with that assessment? Absolutely? Okay, yes, So in the first half of the year, what kind of returns can people expect? I think first, by the end of the second quarter, I think you're gonna look at

maybe seven to nine. But it is definitely going to be much more choppy than we saw this year, even in the first half, even in the first half, and I would suggest that the volatility that we see peak next year will be in the first half. Really why well, a couple of things. First of all, the cbo EUM options are suggesting that there's complacency in the market, and pretty much everything else is suggesting that as well. And the fix if you look at the fixed with a

twelve handles complacency in the market. When you see those two um indicators at the press levels that they're at there, it's almost a near certainty that something is going to disrupt that calmness in the market. And I think that that's likely to happen somewhere Q one, Q two. Now, I'm still constructive on the year, but I do think we're going to start seeing some volatility. It's just we

just had too long a period without it. So is how much of your you know, six to eight, six to nine percent kind of return scenario predicated upon a very benign FED? Big part that great, Yes, that's a huge part of this, because you know we're heading into an election year and we all know that the FED historically in an election year tends not to be active

in the market in terms of shifting policy. Now, the FED has already told me I was suggesting maybe we could have a rate increase at the data Lisa quote unquote rejected that. If she's right, She's absolutely right. Now we're going to continue to see the FED ad liquidity because you know, we have the Repoke conversation. But that said, I don't think we're going to see much in the way for its side. Yet you reject that as well. Yes,

I mean, it just seems implausible to me. They are so shell shocked by what happened last year in December that there's no way they're going to do that. Rightly. Okay, So the question is we're gonna actually see inflation pick up. I think we may see a degree of inflation. And the reason why I say only a degree in spite of what we saw today in the data, is because the global economy is not going to allow inflation to

really rise above where we're seeing it right now. But then, how much inflation do we need to see before it disrupts the sort of complacency that we see around no inflation and that that's being priced into. I don't think that inflation is going to be the driver of what upsets the complacent. I don't I just don't see it.

You know, we're seeing great, great employment numbers, great confidence, and great income gains, and we're seeing that in really healthy spending, but we're not seeing it through to the economy in terms of making things more expensive, with the exception of some real estate some pockets, of course, but that's been a thing that we've been dealing with for now, for three or four or five years. We've seen in

twenty nineteen in this grind up in the market. You know, periods during the year would be people were saying I gotta go defensive, and then we'd see people going back into more cyclicals or maybe even the growth stocks. How do you how do you think the will be in terms of do I take a little bit more risk with microL folio or I get a little bit more defensive. Well, I think that people who have been around for any period of time at all are And I was with

a couple of pretty significant individuals last night. In terms of the markets, the sense is that listen, if I'm putting the money money to work in the market right now, I'm nervous. I'm nervous. Why because of the run up we've seen, you know, So, I think if people are looking at their overall portfolio, they're going to look at a more defensive posture that's going to be fueled by policy, in other words, a degree of certainty that the markets

might not otherwise provide. And I'm speaking specifically of infrastructure. Okay, what do you think will be the worst performing asset class? Of what's the big loser? I think it's going to be utilities. Interesting, I think it's going to be utilities. And the primary reason I say that is because UM

with utilities pricing is largely baked in. There's very little alpha out there that you can harvest that is going to be priced into a market where there's going to be a lot of liquidity and there's going to be a lot of money slashing around on the market. It's not going to be looking for dividends, right Well, so on the flip side, what's going to be the absolute best performing asset class? I love infrastructure, for UM, love heavy construction. UH continue to be very, very engaged in

real estate space. I think in spite of the fact that we're seeing pockets I think it's you're seeing pockets of over I would suggest inflation in some real estate markets, but I think that's also fueling a wider growth in real estate demand and exposure in terms of investment. So secondary and third tertiary markets are seeing real benefit. Now, do you think we're actually gonna get a trade deal that's actually on paper that somebody can see. Are we're

just gonna get tweets? We're going to get a trade deal and is going to be a significant tailwind to the global narrative. And that's that's the that's that's the thing. It's it's really how the globe looks at what the opportunity is in trade again. Yeah, narrative is the key operative. It's not clear what that will do, but the narrative matters because it matters for business confidence. We saw it

in the fourth quarter last year. It really narrator mat On the flip side, yea, all narrative terrible than narrative wonderful. Now we're narrative pretty good. Peter Kenny, thank you so much for being with us. Peter Getty, founder and Strategic Boards illusion Um, founder of Strategic Board Solutions, joining us here in our interactive broker studios. Well, have you ever stepped back and thought, where does all the world's garbage

got a lot? I never did until I saw a recent Wall Street Journal article talking about it and they said most of it has been going to China historically. But now I was China saying, gee, maybe not anymore. Julia Atwood, head of Advanced Materials for Bloomberg any f joins us to chat about this. She's in our Paris office today, Lucky for Julia. So Julia, this was an interesting story. Again, A lot of trash historically has gone

to China for processing. Then I get starting last year they said, we're not really interested in your trash what's the story here, Hi guys, thanks for having me. Yeah, the story is really interesting ing, especially because China is kind of half of it, and then the circular economy is the other half of it. So what China said was, we don't want your trash anymore because it's too dirty, it's too poorly sorted, and we think of it as toxic waste. So they have basically said, we are moving

towards advanced manufacturing. We want to make the really difficult stuff. We don't need any more waste plastic to use to make toys or simpler products. So they called it their National Sword Policy, and it was really about how they're changing their manufacturing focus and the quality of what they were getting from other countries. Julia, I think about this all the time, in part because I'm trying to understand. Let's say you get take out Chinese food and you're

going to recycle the plastic containers. How much do you have to wash them in order to have them properly recycled. I know this is crazy to to be talking about this, but it's actually it goes to the fundamental heart of this right m M. It does absolutely, because it's a totally different story if you've got something that's really clean and really well sorted, because then recyclers can get a

high value product out of it at the end. Um So the recyclers would tell you, my god, put it in the dishwasher, have it clean, sterilized, and put it into a completely separate bin. So they want something perfect. Why they want something perfect? Why can't we come up with technology that just does that? I mean, because that's if that's the huge obstacle between reusing and not reusing. Uh, you know, it's going to take a whole lot of education, luck,

and probably failure to get this right. Why can't we just come up with better technology? Well, we have because I think a lot of people have realized that trying to convince a mass of consumers is difficult, and you want to be thinking about asking companies to do something because they're kind of a point source for all of these products. So there are better technologies on the sorting side, whether you're using robotics or computer vision to pick out

the right plastic. But what's also really interesting is that the packaging makers themselves are going back and looking at the re design of saying what can I do to be better. And then there are some companies who are just sidestepping the whole thing completely, looking into new processes like chemical recycling that can deal with a few more contaminants. There are a bunch of ways that we can sidestep

these problems through better technology. Can you give us a sense of how, I don't know if how the world has done in terms of recycling, or maybe how the western developed world has done. I mean, over the last ten or twenty years, is the world recycling materially more than it used to? Not? Really, it depends on which country you pick. The really stand out example of the people who have done very well with their recycling is

actually South Korea. And the reason why they did so well is because they introduced something called the pay as you throw scheme that they actually got charged by the amount of waste per household they were generating, rather than having a flat fee buried somewhere in your taxes that you can't see now in Europe. In the US, we've actually seen some recycling rates starting to go down because

it's just getting too expensive for municipalities to do. So what's the US going to do with China now rejecting our recycling well, what I think is the most interesting part of this whole question is how other parts of the supply chain have started to get involved. So China saying we're not going to take plastic waste made all

the waste managers sit up and take notice. But what's happening at the other end of the supply chain is consumer companies are coming under pressure to be more sustainable and recycle more because of all the terrible images of plastic waste in the ocean. So what started to happen, especially in the US, is these brand owners have said, we can't be held responsible for this, we have to

start making investments. So we recently saw an Espresso give over a million dollars to a recycling company to install a new line to cycle those little aluminum pods for your coffee. So the waves managers are kind of sitting around saying, Okay, when do I get my million dollars? Like, when is the brand coming to the rescue to help us fix our recycling infrastructure. Coca Cola, Pepsi, Corred Doctor Pepper together they're putting a hundred million dollars into better

curbside recycling. So really it's the companies that are leaving leading it, not the policy makers. All right, just a quick question. If the garbage isn't going to China, where is it going. A lot of it is actually being

stored in Japan. They just have massive storage facilities that are holding onto the waist and hoping prices are going to increase because most scrap is actually traded and there's a little bit of light at the end of the tunnel because we're starting to see prices for the kind of plastics that go into detergent bottles actually being higher than new material. So the markets are going to rebound.

Julia Atwood, thank you so much. Really interesting. Julia Atwood, head of Advanced Materials for Bloomberg, the benef Bloomberg New Energy Finance. She is normally based in New York, but in Paris today. And I gotta say I think about it all the time. You started by asking how often do you think about it? And I think about it all the time because I think about how much to clean each item, and then if you end up washing it with a lot of water, is that ineffective or effective?

I mean, I know I sound really tortured when I when I go into this, but I think about it. Every time there's some plastic container, it's like, well, how much effort should you put into making it spotless? It's interesting, you know here at Bloomberg and all the Bloomberg offices around the world really really focused on recycling and really take the time to have all the separate bins and

separated and we have all the compostable things. I just wonder what other companies and what are the households, to what degree are they taking it? I just don't know. Well, and at what point do you just bring your own dish? I mean, I'm serious, Like, at what point do we just stop with the disposable stuff? I don't know. Interesting questions. Holiday shopping starting to wrap up here. We have Christmas

in a few days Hanakah starting on Sunday. Let's get a sense of how things are out there in retail land. We welcome my good friend Jim Fallon, editorial director for Woman's where Daily joins us here in our Bloomberg Inner Active Broker studio, braving the cold of New York City. So Jim, give us a sense here where you know, we kind of came into the holiday shopping season cautiously optimistic. I heard numbers of you know, kind of fourish percent

growth in terms of retail sales around the holidays. What are you finding? Basically, those those forecasts ended up being accurate. It looks like it's going to be about four percent growth, maybe even a little higher. We were cautiously optimistic. I think the jobs picture, the overall strength of the economy,

fed into a consumer optimism that really hasn't waned. But I think what's happened is that the shopping happened early, then there was a lull, and now you'll see this weekend, the store is busy on this Super Saturday, last Saturday before Christmas. When we came into this holiday shopping season, one of the things I heard was, Oh, it's going to be a short, compressed holiday shopping season. Thanksgiving came late, and so on and so forth. Is that gonna be

a big issue? Do you think when the total dollars accounted, I think the dollars will be the amount that was going to be spent. So I think it is. I mean for the retailers, it's an issue for the retailers less the consumer. The consumer is going to shop how much they have six days less, but they're not really conscious of it. It's a tighter pipeline for the for the retailers to get their markdowns in and so forth, but the overall dollar number won't be reduced because there's

six shop fewer shopping days. Yeah, that's one of the things that I've learned as I spent more and more time looking at retail It's not just getting people in the door to buy stuff, for getting them to click the buy stuff, it's what kind of promotions you had to offer to get that traffic, whether it's foot traffic or e traffic. Any sense that promotions which are neg if for retailer's margins are running any higher than lower the normal margin. Promotions are a little higher this year.

They were earlier. Again, retailers started promoting even before Thanksgiving and Black Friday. So what's happening is that the Christmas shopping period is getting extended into early November even for some retailers, and mark promotions are a little higher this year, so margins will probably be impacted. Plus you have things like free shipping that have to go into the cost of it and so forth. So what are people buying this year? Is it? Is it just kind of the

electronic gadgets or is it fashion? What are people buying? It's the normal, it's electronic gadgets, it's you know, it's the AirPod, It's that kind of thing. Fashion is the normal, sweater is cold weather gear, et cetera. There isn't There hasn't really been a breakout fashion item that drives consumers to the store in quite a few seasons, and that again has been an issue for retailers. So it's interesting.

I'm not sure if this is quite your belly wick, but toys UM toys r Us no longer in business where the moms and get these toys. Walmart picked up a lot of that business. Target has has picked up some of it. Um Amazon of course, So I think I think those people recognize even as Toys rs was struggling, that they needed to rush to fill in the gaps,

so they all they all expanded their toy offering. So we all know that retail sales really over the last ten plus years, maybe even more, shifting pretty dramatically from the bricks and mortar to e commerce, Amazon and so on and so forth. How are the retailers doing trying to make that migration from you know, bricks and mortars solely to maybe what I've heard as a term omni channel. How is that going? Are there winners and losers or

is everybody kind of struggling? It's there are definitely winners. What you're seeing is, you know, the Walmarts and the targets of the world are winning in that with the buy online, pick up in store so called bopus or click and collect um. But if you look at Walmart, it's market capitalization has increased by a hundred billion dollars to years, so they're beginning to figure that out, and they're beginning to use their stores as as many distribution

centers target the same. So those very much our winners. Retailers such as Macy's are still sort of figuring it out um to a certain extent, but again they're getting there, but it's a challenge, and I think I think the omni channel world world almost has to disappear because it's just retail now. The consumer wants to buy it where they where they want to buy it, and want to pick it up or get it however they want to. There's always those in my town where I live in Jersey,

there's always those shop local days. And the signs and not shop local, which we we certainly try to do, but the reality is they can't really make those investments to get us to where we think we ought to be, which is I want it now and I want to anywhere I want to get. So what is small? And that's kind of where the you know, the real retail is it down at the you know, the local level. What are the local retailers trying to do here? I

think the local retailers play up the personalization attitude. We know our customer, we know what you want. Oh, come in and buy. I got this specifically for you, this is your size, ETCETERA product differentiation to a big extent um and service. I mean, I think that even if it's if it's a Walmart or it's a major retailer, you're not going to get that personal service. You're walking into the store and they say, how are you? How your children house? Whatever? That's the edge they can play.

I can tell you Tom Keen is heartbroken that Barneys is going bankrupt. What do you take away from that? I mean that was a great brand, high end. What happened there, It was high end to a certain extent. Online killed it. I mean a lot of those products became available through the Netta portes, the matches, fashion, et cetera. You could you could literally sit I mean, Barney's had

its own website. The move uptown to Madison Avenue, even in the nineties was probably a misjudgment of the business, given the rents that they had to pay and so forth. Then issue killed it and it was just keeping up with your customer. I think that the product became widely available, and they also became so high end that they didn't have a sort of lower tier that would drive a lot of foot traffic through the store. What is your

sense of just the department store concept. Is that completely dying or is there a place for I'm looking to Cross Street, Bloomingdale's, Macy's, what's the future. I mean, they've been predicting the death of the department store since the seventies, so you know, clearly it depends on the department store. I think there's still a place for them. American department stores are in the middle of reinventing themselves. But if you go to a lot of the European department stores

or even Asian department stores, they're packed. If you go to a Salvages in London. That store is packed, it's offering very exclusive product, it's offering, you know, everything from a bakery to a t store to a flower shop, et cetera. The more those stores expand into those kinds of things, and again, horrible word, but the experiential type retail,

there is very much still a place for them. Still over We still overstored in this country though we had that, I mean, I've heard by as much as yes, I mean, I mean again back into the eighties, we've been overstored compared to other places. All right, Tim Fallon, thanks so much for joining us. Jim Fallon's editorial director for Women's Wear Daily, joining us here in a Bloomberg Interactive broker studio. Thanks for listening to the Bloomberg P and L podcast.

You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm Lisa abram Woyit's I'm on Twitter at Lisa A. Bram Woit's one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio