It's Like Nordstrom Without the Clothes

new quote neighborhood hub shop. In other words, this is going to be a store that's smaller and has no merchandise, and they're going to open this on October three in West Hollywood, California. Did not go over well with investors. The shares fell about three on the news. And here to talk about this whole concept of window shopping with no merchandise that could be potentially the new front of retail is Punam Goyle. She is our own analysts that

covers Senior. She's our own retail analyst for Bloomberg Intelligence and she joins us. Now, Punam, you know, I actually thought this was not a terrible idea kind of moves to the whole experience, kind of uh focus that a lot of retailers are looking to do. What's the problem here? What was what were investors responding so viscerally to? You know, I don't know if the response yesterday was to this directly or maybe something else, but I agree with you

and I think it's actually a neat concept. It's one that more retailers should start thinking about how to drive people in their stores and how to shrink their stories. I mean, a three thousand square foot store versus their typical hundred and forty thousand square foot store, that's uh, you know, a big difference. And these three thousand square footstores can go anywhere. Well, and Punam, can you give us a sense of what these stores might look like,

what the experience would be walking in for a customer? Sure? So, you know, you walk into these stores, you get a refreshment, whether it's beer, wine, coffee, whatever it is. You said, A personal stylist greets you. There's eight big dressing rooms. They talk to you, they understand what you like, and then they have you try on a few things, and whatever you like, you can either come back and pick it up later or it can be shipped directly to you.

So they'll have merchandise there, but that merchandise is not for sale. Immediately you walk out bagless. I'm just trying to wrap my head around this punam. And I understand, you know, Lisa thinks it's not a terrible idea, that's a great endorsement. Um, But you know, drinking wine, personal tailors. How is all this scalable? How do you do this with a company that's a fifteen billion dollars in sales? You do it because you can have so many of

these stores. So nord Storm is coming to New York City in full price store, a flagship store, a flagship store. So why can't and this is really you know, me thinking very out there. Why can't they add a three thousand square foot store in Soho and use the flagship store to fill that demand. They have a hundred and twenty two full line stores. They can go into major shopping destinations and add these smaller stores and use their

hubs to fill the demand. So totally, I actually I totally see this, PIM because if you think about it, I enjoy a glass of wine. I want to talk about, you know, what the latest trends are, and try things on and make sure things fit all right before you order it online. And uh, you know, not only that, but putam, is there any discussion about creating other aspects

of the experience. I mean, I know that like, for example, the M and M store in Times Square had a very kind of playful environment, or the old fo Schwartz with the the clock and the how did that do? Yeah, and just but that's okay. Well no, I was gonna say, you know, to go back to your point about you know, Okay, so that norths To opens the flagship store in New York, and so they're going to do a smaller square foot

maybe a five thousand, three thousand square foot store in Soho. Well, the reason they're not going to make any money there is because it costs four point three million dollars a year for a five thousand square foot storefront in Soho. It's expensive. Everywhere you want to go, it is expensive. But just think about the traffic that they get into those stories and the sales they can get out of

that three thousand square foot box. I mean, look, I don't know exactly what these stores are gonna look like, but I would be more than happy to go in for a petty manny and um, look for some clothes while I'm doing that, and try him on, and then walk out and have it sent to my home and walk out without a bag because you don't want to carry a bag everywhere you go anymore. For all the men out there, a manny petty is a manicure pedicure.

And I agree with you, But I also think that there has to do uh there there There has to be an advertising element of this as well, right, I mean, if you think about at the four point three million dollars that it costs to have that space, if they have incredible foot traffic, if they have an experience that gets the word at the word out, that seems to be a destination for people, I mean, that's that's advertising.

That's worth it for them, right. Yeah. Not every three thousand square foot store will cost them that much money. I mean there are other areas, densely populated areas that they could go into with these smaller footprints that maybe don't cost that much money. All right, So let's let all kidding aside. Though, how many do they intend to have? Any idea how many of these new kinds of formats

do they intend to open? And what precludes the competition from opening another small three thousand square foot space right next door. So so far one, Um, no announcements of anything further than that. There maybe one in Toronto, but UM, it's just you know, they haven't announced anything further. I think they're going to test and try, see how it goes, and then we'll hear more. As far as competition, why not, I mean, why isn't everyone thinking of something similar or different?

We saw colds just uh, I think over a week ago announced at Amazon coming intent of their stores to showcase, ace test and try Amazon branded goods. So people are thinking retailer, they're thinking outside the box. They're trying to find ways to drive traffic and use the box more productively. Well, I think that it's fascinating. And I imagine that they'll also have people who help, uh style different outfits and looks for people, so there'll be more of that kind

of tailor experience as well. Right, Yeah, and then and then you get a fitted to. They have a tailoring service on siting. I mean that's just you know, one stop shop if you're a north Strom shopper or our north Strom potential shopper that you know would be interested in clothes from the ore Shoes put them Goyle, thank you so much for joining us. Put him. Goyle, a senior retail analyst for Bloomberg Intelligence, talking about this new

window shopping no merchandise store concept and uh, it's interesting. Nonetheless, it's interesting to see retailers think outside the box and try to uh come up with new experiences in a time when people really do order so much online. Mark Usco has had some harsh words for certain e t F s. He called one slice of the funds one

of the worst things ever created. Now he's starting his own e t F. Marc Usco joins us now Marcusco as chief executive officer and chief investment officer of Morgan creekt Capital Management, which oversees almost three billion dollars in Chapel Hill, North Carolina. Mark, So, what convinced you to plow into this territory that you've had such criticism for about in the past few years. Well, at Lisa, you know, I think it's important to note that I've actually never

been a critic of E t F as a structure. Yeah, I think I think DTF structure is is quite a good one. What I was critical of is is certain strategies and the one that I did call, you know, maybe the worst invention perpetuated against investors in a long time. With this idea of low volatility, where you buy stock only based on the volatile e of its price, no regard to fundamentals, no regard to how the company performs.

It seems like a really bad idea to buy something no matter what the prices and whatever the value is. So the structure of ets IS is a really good one, and I think the biggest reason for us to to kind of crossover is we've been involved in the alternatives world for a very long time, and that basically meant that the SEC said, you know, if you weren't wealthy, you couldn't have access because of all the restrictions against

the credited investors and qualified purchasers. So this is the way to bring our styles and strategies that we think are really good ways to manage capital, honed in our endowment experience, into the world of the average investor. So, Mark, will this exchange traded fund? Will it be passive or active?

It'd be active, And I think that's a really important point, you know, although I get kind of buggy on this on this word to PIM and that the word passive is kind of a misnomer and that these things aren't passive, right. You know, most of the stocks in the sp SP weren't there thirty years ago. There's been I think turnover. It's just slow active and they're really momentum based strategies because of the capitalization waiting in most of these index ones.

So I don't really like the term passive, but you know passive is indexing, and that all the other things. This will definitely be active in the sense that it's going to take our best ideas that we come up with once a year in our our primary themes, and then trade within the year around those those best ideas and try to deliver. You know, we think alpha because to us, alpha is smart. You know, there's this whole thing called smart beta. Beta actually is dumb, not meaning unintelligent,

but it's rule based. Alpha is where the smart part of asset management is. So mark you set the best ideas once a year. Correct, Yes, those are the big themes, so kind of ten big themes that we think have you know, about a fifty fifty chance of happening. But if they do happen, they'll present up you big upside return opportunities. You know, this year, a good example would have been short the dollar. Everybody thought the dollar was

going up this year. In fact, of those surveyed on Bloomberg and other places thought the dollar was going up. So if you were short the dollars this year, you've made a lot of money. And if you were long the rem and B, which was the opposite of what most people were doing last year. So Mark, currently, what's one of your best ideas? So you know, well, short the dollars is still you know, one of our our

top ten ideas. Uh. We also like the idea that that interest rates are going to continue to go down, not up. Uh. You know, everybody thought interest rates we're gonna rally really hard after the Trump victory, and and they did for a few weeks. And they started the year at two sixty an hour down to to sixteen. And that's a surprise to everybody. But are probably our biggest one is this wealth transfer from the developing world. Two I started from the developed world to the developing world.

And we think emerging markets are are going to continue to be the place to be. They're gonna have a decade of dominance for the next ten years. And while we think the US market is going to struggle to make any return, um basically be flat for a decade, just like from two thousand to two thousand and ten, we think emerging markets could could compound in the high single digits, even low double digits. Hey, Mark, what happens

if one of these ideas goes bust? Well, you know they will, right, I mean, we're not gonna get them, all right. Uh, And that's why it's going to be an actively managed et F. It's great question. Um, so that you know, we we think one of the strengths of of the endowment model. You know we've lived our our whole careers is is the risk management. Focus on risk management, focus on protection of capital first, growth of capital. Second. You know, if you take care of the losses, the

gains take care of themselves. The stop loss on each of the positions. I mean, do you say to yourself, all right, if this is that, if this goes down more than seven in the next six months, I'm out of here. Again, really important question. We don't we don't like those rules based stop losses because what we think that does is is it. It tends to what people

do is they buy high and they sell low. We rather try to only buy things when there's a margin of safety, so that some decline in price is actually okay and actually gives you an opportunity to buy more of something as long as you're below fair value. So you know, if it turns out that you you know, made a miscalculation on fair value or you know, just wrong, or the trend changes, you know, then you've just got to step to the side. And that that's really more

of a judgment call. And that's where I think the difference between active management and passive management really comes to bears is the whole concept of judgment. Passive has no judgment. It's not allowed to have judgment. It has to buy whatever. You know, the rule says it's going to buy no

matter what the price, no matter what the value. Well, we're gonna see what happens, right, We're gonna see where your et F is gonna come out, and we'll we'll check in with you to see whether this new uh sort of actively managed e t F will grow to fruition as you describe. Thanks very much, Mark Usko, Chief Executive Officer, and Chief Investment Officer, Morgan Creek Capital Management. I want to bring in John Butler to learn more about the Apple launch. John, in your world, is this

you know? Is this like Christmas, Thanksgiving and I don't know, New Year's all rolled into one. Well, it's a big Christmas this year, PIM because we get an extra iPhone under the tree. Um, Apple for the first time in a long time, is coming out with a product line extension, and it's a perfect year to do it because it

is the tenth anniversary of the iPhone. The latest rumor and there have been a lot rumors about what it's going to be called, but apparently it's it's going to be called the iPhone ten and Um it's at the very high end of the market, so a lot of people are talking about the high price, the thousand dollar plus price point. But I think I think it comes with a pretty significant redesign. They're taking the home button off.

It's a LED screen, so which are beautiful screens by the way, Samsung uses O lead and you get black or blacks and whiter whites. Um, and it's gonna be a large screen, larger than the iPhone seven plus by about point three inches, so they're the screen sizes are getting up there, and I think Apple is positioning it to compete with Samsung's new Note eight, which has actually had a lot of demand for that, so it seems

like they have some stiff competition. It does, and it's priced at n fifty dollars, so it's at a similar price point. It's discounted basically, right. But you know, John, I'm sorry, I personally have this visceral reaction to the frenzy that Apple is able to whip everyone up into. Can any other company creates such a glut of just natural advertising, just everyone talking Apple phone, Apple phone, Apple phone all the time? I mean, why is there such

an excitement over this? The roots are in Steve Jobs. Like Steve Jobs, you know, with the initial iPhone announcement ten years ago, that was really something. I mean, it was a brand new device. He had basically taken what was up to that point a consumer electronics device and turned it into this appealing accessory. And in the years that followed, of course Jobs did a great did a

tremendous job, no pun intend. Well, do you think that this new iPhone will elevate the product to a new level, so they can even be considered a somewhat new innovation, right, because that's that's been one challenge for Apple is that they really haven't come up with a new hit. They have not come up with a new hit. What they're looking to do, Lisa is broaden the category a little bit.

So they're going to the ultra high end. There are a premium phone player, but they've never had a true match for the Note Samsung Note eight now um, and so I sort of view this as an important event because you're getting in a typical refresh by the way you get to new phones. We're now getting three, including this high end phone. So I think it's a big deal. And I think all the excitement is reflective of the power of the Apple brand. They really do have a

great global brand. Yeah, they also know how to leverage it. I was gonna say, they also do two hundred and three billion dollars in sales a year, So do anything that a company of that size does, you're gonna want to pay attention to it. So the challenge now for Apple is they need to go from hardware innovations to can tell people to upgrade the more software and so what I'm looking for in today's event is what are we getting in the way a new content, new services,

um adjacent product markets. I hear we're getting a new watch that is going to be completely free of the iPhone, which this one will tell time terrific. It may tell time. That's we'll see what I mean. I mean, I understand this whole you know ecosystem with Apple and so on, But I I thought that the challenge that Apple really has, never mind the one thousand dollar price tag, but is getting people in China to buy their products. It's getting people in China, which is matured, and now it's getting

in India, which I think is a long shot. We did a report taking a close look at that market. The monster portion of that market is at the low end price below two fifty dollars. I think Apple doesn't stand a chance personally. But you know, it's interesting that you focus on content. I wonder how much of this

is also geared at creating customer data. There's been a lot of talk about one big benefit that Google and Facebook have over Apple and the long term is that they have amazing access to all of the customer data.

Amazon also, where's Apple in this nowhere yet. But that's where the content comes in, right, because if you're producing original programming, or even if you're not producing your own programming, you can benefit from the ad dollars and targeted ad dollars at that based on what you know about your

user base. So when you heard Verizon originally give the hard sell on leveraging content at A O, L and Yahoo, they were talking about leveraging what they know about their wireless customers, A T and T is probably going to do the same thing, and Apple is in a great position to do the same. So again I'm looking for new a new maybe streaming video service coming this afternoon. Um, they've made some big hires out of Sony, so they have a great content team. Where's it going now, that's

the big question. Just to follow up on what you said about A T and T and Verizon, the chief executive of A T and T, Randall Stevenson, today saying expect the time, want to deal to close by the end of the year. And oh yes, if you're interested in HBO, it'll be free to all wireless customers that have an unlimited plant. So there that's an answer to T Mobile coming out the other day giving free Netflix to people, and so, not to go off on a tangent, but with the talent, But that's the same kind of

thing you're talking about with Apple. Yeah, it's okay, you got the device, you're gonna need the content. Yeah. For the telcos, they're dealing with the same market maturity, and it's led to pricing pressure and wireless. How low can you go on price before you hurt yourself? And what do you do instead? You add value to that commoditized service and their owing it with content And so a T and T is merely responding to what T Mobile did by giving Netflix away for free for T Mobile

one subs on family plants. How far away are we from peak content? I don't cover content, so that's a tough call, but it's something I'm watching. It's getting to be an awfully crowded market. But it's interesting to see where content is going. It's moved from long form sit in front of the TV in your living room and watch it for an hour, to short form watching it on a smartphone. So in that sense, the ball is

moving into Apple's court, not away from it. Yeah, we're all a d D now, John Butler, thank you so much for joining us. Always a pleasure to speak with you. John Butler has senior Telecom Services and Equipment analyst for Bloomberg Intelligence, talking all things Apple, Apple, Apple, Apple, the new iPhone. Let's turn our attention now to infrastructure and utilities when it comes to the aftermath of Hurricane Irma. Joining us as Kit Connledge, he is our senior Industrials

and Utilities analysts for Bloomberg Intelligence. He joins us here on our eleven three oh studio. Kit, thanks for coming in. Maybe just give us an update. I was looking at some headlines that said that about six and a half million customers are without electricity, but you brought your spreadsheets and you've got more detailed. Well, the it looks to me like the latest from the grid operator in Florida, UH indicates that we're damned to about five and a

half million outages now. So uh, they're obviously getting to the low hanging fruit first, let's put it that way. So the further south you were, the quicker the hurricane went through. So those guys are getting fixed now pretty readily. Presumably the keys are going to have a hard time getting fixed, but there's not that many electric connections and the keys. So um as you fix up Marco Island and up the west coast than FPL completes this, it's work.

But the North Central Florida, Florida Power and Light is the one and North Central Florida, where Duke Power Florida is has still a higher percentage of their outages remaining. Can you give us a sense of the scope of what it will take to get power online. Are we talking about down to power lines that need to be just put up and re strong or is there more

substantive damage to the infrastructure. From what I've seen, the utilities haven't really determined yet how much uh real deep seated uh problem they're going to have with the infrastructure. It uh you know, the initial things they're indicating seem to be maybe not as bad as could have been expected. So a lot of the power plants, which obviously are uh, if you will, most important, uh don't seem to have

been affected. And then you have these things that you uh you call the substations, which are like billion dollar installations that connect high power lines to low power lines. They were raised and they shouldn't have been flooded. That was the purpose of all this work they did in the last ten years. We'll see how well that turns out well and then a kid going forward. This is

going to be expensive. And I'm just wondering what the financial condition of UH next eras Flora, Florida Power and like which you were talking about, Tampa Electric, Duke Energy, Florida Southern Companies, Gulf Power, and Georgia Power. I mean, how how are they going to afford this? Well, that's a very fair question. I would say that for next year, and Duke and and the Southern companies subsidiaries and Southern

got hit in Georgia Power as well. Of course. UH. Those are all companies in the range of fifty billion market caps. So even uh, you know, a bill in the billions for them, and even assuming they had trouble collecting it from the ratepayers, which in theory they're allowed to do, UH, there's no existential threat to those kind of companies. UM. Tampa Electric has a smaller UH company, so there may be something there. They're a subsidiary of Amero,

which is a Canadian company. Can't Uh. This is going to require, as you mentioned, a lot of work. It's gonna require a lot of people. One estimate by the chief executive of Southern Company, Thomas Fanning. He said that they might need between fifty and sixty thousand workers from all over the US and Canada in order to actually rebuild the Florida infrastructure. From from what I've seen the companies across the country UH putting out and press releases.

They're flocking in literally from all over the country and probably from Canada as well. UH. It's it's a good thing for the utilities from out of town to do. UH. Turnabout is fair play if something happens to them they want There's a lot of uh of cooperation and the utility industry for these kind of natural disasters. They're not direct competitors here. Once their power lines are down, then everybody wants to help. Plus they get paid for it,

so it's it all adds up pretty well. But everybody knows in the industry that it's important to the local utility to get the power back on. And if you wait more than a week, uh, people start grumbling. And it's not obviously always in your control, but they can empathize because they've all been through this that if you have problems getting everything connected rapidly, UH people are going to start to complain and that's always bad for utility.

Kit Conneledge, thank you so much for joining us. Kick connel Edge is senior Industrials and Utilities Utilities analyst for Bloomberg Intelligence Intelligence if I can speak today, joining us in our Bloomberg eleven three oh studios here in New York. And while it wasn't as bad as we thought, Hurricane Irma did cause devastation in the Keys, and the Pentagon is now saying that ten thou people still may need to be evacuated from that region. Thanks for listening to

the Bloomberg p m L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio.