Wind Waker Kaleidoscope?

[SharkAttack]

In the wind waker, most important items, people and places that can be interacted with are highlighted Red when in conversation with people. I just remembered that during the game I came across the telescope man and he muttered something about "All the pretty colours in this Kaleidoscope". It was highlighted in red...Was this a reference to an object in the game I have yet to find or is hidden? Or is he just meaning he is looking through his telescope and seeing something colourful?