crazy morning. it's tuesday, july 21. you are watching "market makers." erik: today is a big one for tech earnings. we will hear from apple, microsoft, and yahoo!. ibm had its third stick -- straight quarterly decline. stephanie: he is going to be joining us at the opening bell. why don't you give us some stories. erik: here are some of the top stories. we haven't seen commodities hammered like this in 13 years. the commodity index is rising slightly today. commodities are the worst performing asset class of the year. everything from oil to sugar to precious metals are down. gold was the latest to get hit. it is up today fractionally after hitting a five-year low.

new york oil is hovering around. nokia is close to a deal to sell to a group of german automakers. bmw would be the buyers. stephanie: the has been a big shakeup at toshiba over and ask -- accounting scandal. they will will have to restate earnings for six years. we have the story from hong kong. >> they announced after the closing bell in japan that they will resign. it is alleged top executives sent -- set unrealistic profits.

a number of other executives will also resign. it you management team will be released in august. toshiba has pledged to correct its earnings by $1.2 billion. the share price rose 6%. stephanie: they make appliances in nuclear reactors. nike has given their ceo and award that is almost 10 times higher than what he usually gets. he has been awarded restrictive stock with a value of 30 million bucks. those are whole of sneakers. phil knight has endorsed him to succeed him as chairman of year when he retires. erik: zach johnson needed a few extra holes to win the british open. he sank some long putts. that gave him his second victory in a major and put two and

jordan spieth's dream of winning the grand slam. jordan spieth was one shot away from being a part of that playoff. he failed to drain a heartbreaker pot. stephanie: he is still having a monster year. let's remember, he did come with us here. erik: let us start you right now with five things you need to know this morning. we're going to begin with shake shack. stephanie: i love shake shack. erik: the stock is down about 4% in premarket trading. why? they disclosed plans to sell an additional 4 million shares six months after its ipo. six months is the typical length you must wait before selling shares. that's what is happening. these are insiders.

these are investors who are taking advantage of a frothy market and an insanely frothy the value -- valuation. stephanie: this is often a very bad sign, when you see the insiders when they are able to ring the bell and cash out i'm out of this game. what you want to see is someone who goes into a deal after an ipo is them doubling down and going all in. that is not what we are seeing happen. payment processing companies are filing for an ipo. it returns to the public market eight years after kkr took it private in one of the biggest takeovers at the time. the company handles trillions of dollars in transactions. we are finally seeing this switch. this is the way private equity works. you take it private and then we

go back out to the public market. erik: it's a great time to go public. stephanie: when you are a private company and you sell to a private equity firm remember, it was deutsche bank who sponsored. you don't want to smell -- cell two a pe firm. they are out. the company is going to go public. do you want to buy? erik: in this case, all of the proceeds raised are going to pay down the enormous amount of debt that kkr had to take on in order to complete the transaction. stephanie: i would rather be on the side of henry kravitz. let's take you to number four. julie hyman has it. number three. i can't get my numbers right. julie koman -- julie: qualcomm

is the biggest chipmaker for cellular phones. they are looking into the possibility of a breakup. activist investors are pushing for change at the company. they own a $2 million stake in a call,. -- walk-on. they have had been considering this for years. you might ask yourself how could it split into? it has a patent business. apparently that is the talk. we will see if it actually happens. qualcomm shares are up in the premarket. erik: if this happens, it will say something about activism. she is a very small participant. 1.75% of what they own. they are not even a 5% participant.

the company has a market value of over $100 million. that says something about activism. stephanie: mary -- maybe it says something about barry rosenstein. you were waiting for that. let's go to the next one. erik: i don't want to dwell on that. number four is more capital rules for banks. the fed put in extra capital requirements for the largest banks, the eight largest banks totaling $200 billion. jpmorgan is the largest bank. jpmorgan would need $12.5 billion more capital. if you read janet yellen's statement on the matter, it's clear that the fed is encouraging the banks to get smaller. that's the only way not to be

tagged with another capital surcharge. stephanie: if you are jpmorgan you can bear the brunt of another 12.5 alien. you may not want to. erik: when the fed became aggressive about bank capital rules in this country, a number of ceos said you are penalizing a great american industry and we are going to be uncompetitive relative to our global rivals. the global rivals are shrinking even faster than wall street. look at what is happening to barclays and deutsche bank. the list goes on. stephanie: don't cry for me argentina. i'm going to say comparatively speaking, smaller banks have had to deal with so much more since the regulatory requirements. not capital rules. erik: they benefit the very thing. stephanie: it ain't easy being a

banker. number five, president obama nominates catherine dominguez to the federal reserve board. she studies currencies and consults with the imf and world bank. erik: it would be great to see another woman on the fed board. if somebody is going to lead, it out to be the fed. secondly, the president has the opportunity to shape the future by putting these people on the board. stephanie: i'm going to keep it technical. you go, girl. demand for ibm parts are falling yet again. they reported sales that missed estimates and revenues. that fell yet again. get your head around this. now it's 13th straight

period. 13. 13 straight quarters. >> it's becoming a real concern for investors. you see this a lot in the premarket. they've looking for proof that the turnaround that she is trying to construct is happening. some of the headlines from the analysts come out and say they should continue with small signs of prod -- progress. there wasn't enough to prove this is moving the needle for the company. erik: at want point -- what point, do investors lose patience where they will start calling for her head? alex: it looks like she had some running room. she tossed that a five-year profit plan. now she is starting to overhaul the company, creating new

business units and selling in different ways. adding more productivity to how they do their service does this. erik: what was she doing for the first two and a half years? alex: that was a lot of the criticism. why are you keeping yourself beholden to this profit planet? why aren't you shaking it up? now she is trying to do so moving and shaking, the results are not proving that it's there yet. stephanie: how big are these moves? are they really -- do they have the potential to move the needle? alex: they have a number called strategic imperative. they say that's growing. it's growing at a 20% clip and expect that to continue. from a smaller base and the rest of this 90 billion a year company looking at these results, the legacy businesses are declining a lot faster than

investors would like to see. erik: so is it really just a question of waiting to see how quickly businesses like data analytics gain traction? alex: it's a little bit of that. they are talking about the services business. it 60% of their business. to get to the profit level that they want to get to, that means pressure on margins. they are investing more to gora these new things. it -- grow out these new things. they are not seen the results on the investments for cloud and automated services. it's not happening as quickly as they would hope. there is profit pressure on this business unit for ibm. that's a big question. the strategy has not been to make big acquisitions. they spent about $2 billion on a

cloud company. we've seen some calls from the analysts saying they have this big cash award. maybe it's time for the new something like by salesforce something that is more transformative. that would be outside the ibm playbook. we haven't seen that yet. erik: can you believe ibm and a salesforce.com? alex: it is kind of a movers and shakers versus the stalwarts at ibm. there was a cultural integration ahead to go on there as well. erik: thank you very much. 2015 could overtake the record m&a pace setback in 2007. gregg lemkau will be here to

tell what's driving dealmaking.

stephanie: welcome back to "market makers." apple releases earnings today after the bell. investors will have to dig a little to figure out how many apple watches were sold. sales will be included in with the other products category. a research firm suggest that orders for the apple watch have fallen 90% since its debut. there is the possibility of a greek exit and that may be back on the table next year. three fourths of the economists surveyed say there is danger that greece could be forced out of the euro in a 2016. the $93 billion bailout package they asked for will prove to be too small. that's crazy. did you hear the number? a woman we all love, taylor

swift is taking on china. she has teamed up with the second largest e-commerce company to sell a fashion line designed specifically for chinese shoppers. her items will be sold on jaiteh,. she has a concert in a shanghai in september. erik: 2015 could be a record year for m&a. already, $2 trillion have been eight what will it take to set the high watermark set in 2007? goldman sachs is the number one advisor globally. gregg lemkau is here to talk about his business. i suppose we start with an easy question. you know your pipeline. does it seem to you at this point like 2015 will top that mark set in 2007?

gregg: it feels like we've got a good shot to pass it. the activity is on pace to match what we did in 2007. it's been accelerating through the year. the pace seems to be accelerating and the kind of transactions we are seeing in the pipeline indicate that will continue. stephanie: should that -- give us any concerns the bubble is approaching? gregg: continues to be smart transactions well-received by the market. i think in 2007, a lot of that was driven by big transactions. they were fueled by a credit bubble and lots of leverage given to companies allowed deals to happen that could not have happened previously. the trend we are seeing is big corporations taking advantage of the equity market to do smart

consolidating industry defining transactions and help drive growth. it drives cost savings. erik: the easy thing to do is look at the total of the deals announced and completed and passed judgment on the basis of those data points alone on whether the market is hot or not. what data points or metrics say more to a banker like yourself about what's happening in the m&a business than just that? gregg: everybody looks at the global tables. that's probably the least important of the three metrics. the second is the number deals -- of deals above $500 million. we look at it in terms of volumes of activity. the last piece we look at our advisory fees. are people paying for advice? erik: are they paying for advice? gregg: yes. advisory fees are up to a record compared to the past. erik: i'm curious to know is

that the total fees taken or are you talking about the percentage? gregg: total fees. stephanie: is that due to the threat of activism? gregg: i think the increase in activity is partially driven by the threat of activism. shareholders are more active. they are forcing companies to do things that are proactive to help not get under attack by activists. erik: when we come back, a little bit more on activism. maybe we stephanie: to get crazy. we are celebrating a milestone anniversary. has the crackdown down what it was supposed to do? we will have that in more when we return. you are watching "market makers." ♪

♪ ♪ ♪ get excited for the 1989 world tour with exclusive behind the scenes footage all of taylor swift's music videos interviews, and more. xfinity is the destination for all things taylor swift.

stephanie: welcome back to "market makers." we are talking it dealmaking with gregg lemkau. erik: the kinds of deals getting done now feel better than they did back in 2007 and better in 2000 another crazy era. what doesn't feel right? gregg: the transactions are positive and the equity market is new. we have not seen the stock price going up on announcement transactions. they usually get discounted. there is risk around the execution.

the market's giving credit for the increase and a giving credit ahead of time for the implementation of synergies. stephanie: the market assumes the deals will go through. gregg: synergies will get delivered as the company says they will get delivered. stephanie: they won't have to see for for five years if it gets delivered. are there long-term investors anymore? gregg: people have to find somewhere to keep their money. they are not voting with their feet in selling. they are influencing of the outcomes. erik: what kind of a factor are hostile bids lane? we've seen a big pickup in unsolicited transactions. gregg: probably more actively we have seen companies jump on transactions. i would say in the past hostile deals, there was a stigma around it. if you do a hostile deal, you'd

better win. if you lost it said something about your strategy. in this market, the stigma has gone away. companies are trying to get a transaction done it. if they're not comfortable, they stop and say good try. you were disciplined and you did not want to go higher. they are helped along by the aggressive buyers out there. stephanie: when we think about dealmaking and consolidation, i felt like all of our focus was on health care and biotech and pharma. are there any industries immune to this? gregg: if you look at the pickup of this activity last year, it was tech media and telecom. there was u.s. cable that started things off and we saw activity across the health care it that has liberated across other areas. there are deals and natural resources. there are insurance deals.

almost every sector has seen activity. we have a market that is running on two cylinders and now it's running on the four or five areas --. erik: are some industries locked out of future m&a? that's going to happen in telecom pretty soon. doj signaled it with charter and time warner. it's going to happen and health insurance. it's already happened and airlines. there is no more consolidation in the airline business. what looks like it's running out of room to consolidate? gregg: maybe there is one deal left. maybe health insurance. i think what's driving part of a frenzy now is that in game consolidation. people don't want to be on the sidelines left out. we've seen -- there are sectors where there is continued room to go. stephanie: what other factors?

gregg: pharma and biotech can go on forever. erik: if you're trying to figure out where that room is running out, you are thinking what? you're looking at consumer? gregg: one of the bigger risks is antitrust. the handful of deals getting blocked i think the biggest challenge around the antitrust is these deals are out for long time. at&t is waiting to get reviewed. if a transaction gets done that's great. if it doesn't, you will see companies embark on something that leaves them out of play for 18 months. i think if we saw a handful of big transactions get blocked, that would chill some of the activity. erik: we'll goldman ever worked

for an activist? gregg: i think it will be highly unlikely. erik: why? it's important to see why your firms don't represent activist? gregg: the corporations are our clients. we do lots of work with them. we advise ceos and boards. we think we are best suited to advise them. if you cross that rubicon and start working with the activist's, it becomes more difficult. you are in the boardroom. erik: they will trust you? gregg: i think they will be wary. stephanie: you run the number one m&a business on the street. your team must be crushing it. there is not a more labor intensive job within investment tanking. we are comparing this to 2007. 2007 was one of the best paid years on the street. how do you rectify that with how

your team is working? you are under pressure from regulators to not pay what he used to. gregg: we've got to finish the back half of the year before we worry about compensation. what drives anchors is dean in the middle of the deal. serving your clients to get deals done. 2015 has been fun. stephanie: your clients are happy getting the c team at. you do that pitch. don't hire goldman, they're just going to send in the c team. hire us and you'll get our a-team. stephanie: there c team is better than a small firms a-team. gregg: the depth of our team, if you look at our same -- senior m&a team they work across all industry sectors. there is a generation beneath

them with similar levels of experience. erik: does it help having three names? gregg: it's a producer/manager business. you have to get out and do transactions. erik: thank you so much. stephanie: thank you so much for joining us. gregg lemkau is at goldman sachs. erik: top stories, the largest wireless carrier had a better than expected quarter. verizon added 1.1 million customers. earnings beat estimates. revenue came in short of estimates. it had technologies is trading at lower. they cut their profit forecast for the second time in a month. demand is weak. the company agreed to sell be helicopter unit to lockheed

martin. stephanie: new york is hovering above the $50 a barrel mark. we have not seen prices like that since april. it is a buying opportunity. >> i would buy energy stocks now. here's why. energy is the most hated it's been in the history of our data. fund managers are more under dated and they've ever been. analysts cap get it flashing oil prices. they've been doing this for a couple of quarters. energy earnings have been cut to half of what they were at the peak. it might be time to start to look for opportunities. stephanie: it was a year ago that oil began its fall to a six year low. the rebound has begun. there is speculation the glut will persist.

there has been an investigation into the explosion of that spacex rocket last month. elon musk says a problem in a liquid oxygen tank was the problem. spacex employees have grown complacent since most of them have only known successful launches. those are your top headlines. erik: coming up, zach johnson to come the british open trophy. there may be another winner at st. andrews. ♪

erik: president obama signed the dodd-frank act into law changing the game on wall street. the point was to make the financial industry safe and sound so it wouldn't threaten the economy. the missive by which it enacted this was to force banks to increase capital ratios.

i like the title of his recent he's heard mark, you brought a chart. let's begin with the key chart. mark: happy anniversary. let's make sure we understand what bank capital is. it's not some rainy gain -- day fund. it's money from shareholders. it's equity from investors who have skin in the game. it's money they can use to make loans and take risks. it's different from that because it absorbs losses in bad times. banks can keep lending through bad times. dodd-frank has given regulators the power to increase capital levels it banks. this is the first chart. ok. you can see, this is a chart.

this is data from the fdic. it's a measure of capital by international recording standards. it's comparable to banks around the rest of the world. capital has gone up to about 5%. that's up from 4% in 2012. if you start with a small number of you know it, you saw smaller one is 5%? it's as if you buy a house and put 5% down. if the value of the house 5%, your equity is wiped out or it if that happens to the entire banking system, that's a problem. erik: how do we reconcile that number with what we -- what the number that the banks report on a quarterly basis? guest: they adjust their assets

according to the risk. erik: there is some sense to that. you would like to think and assume rightly so the treasury is less risky than an equity? mark: absolutely. you have to look at capital in a number of ways. this is a simple way of looking at capital, but it's very important area --. erik: it shows that banks don't have enough? mark: in 2009, the imf estimated that banks total losses would estimate to 8% of their security and loans. that's already more than 5%. historically, if we go to the next chart before the introduction of the deposit insurance in the 1930's, they had 15% capital. erik: you're not saying we

should go back to a 1930's style financial system? mark: no. you want banks to have enough capital so that after a crisis they would be strong enough to keep lending. erik: you want banks to have little enough capital that investors have a reason to take money in the banks. they want a decent rate of return. if there is so much capital and so little income there is no return and nobody will want to buy investments. mark: you have to look at risk-adjusted return. you're less likely to lose a lot of money in the downturn. in return for that risk, you accept a lower return. stephanie: dodd-frank is not going to get scrapped this point. what should be done to make it more effective and impactful and non-hurtful?

mark: dodd-frank it has three very good ideas. one is to create a financial early warning system so regulators can understand when there are risks accumulating in the system. the second is in the case of a crisis you want banks to be resilient enough to survive. if banks do get into trouble, what regulators to be able to resolve them with minimal collateral damage to the rest of the economy. dodd-frank has made progress in these areas. it's not done in any of them. banks still have a hard time providing regulators with timely information on their exposures. regulars have a hard time understanding data they are getting from banks. as we see from these charts capital charts are still low. you want to ask managing their assets to justify thin capital.

you want them to have enough capital so that they can take the risks that make the economy dynamic. erik: mark, thank you. it's good having you here. he is a columnist at bloomberg view. earnings are coming up after the bell. stephanie: we are going to talk tech earnings with a man who founded the internet research franchise. how companies like yahoo! and aol went public. he is an authority when it comes to this. stay with us. ♪

stephanie: don't get confused. you're not looking at new york city. that is london. it is 1:46 p.m. in the afternoon. it's gray in breezy.

it's not sweaty and sweltering like nyc. you are watching us here at bloomberg world headquarters. we've got to talk earnings. concerns over greece have receded. european stocks are boosted. how do the markets look from a private equity perspective. eric curse joins us. -- eric hirsch joins us. welcome back. what are you most focused on it today? eric: it's become expensive in europe. they were not playing a lot of the distress with greece. private equity in europe is concentrating in europe and the u.k.. they are all strong economies. they are pricing expensive. stephanie: when did he get so expensive? erik: the investors don't change

allocation policies. it's a mistake. they stay on course rigidly investing. the allocation dollars are flowing. erik: why is it -- private equity investors are a smart group is rule. why is it that the smart people are willing to pay high prices for assets? erik: they are buying very high quality businesses. it's weathered the european storm. it's starting to grow. growth is at a high price. erik: they are making it more difficult for themselves in the long run. this is a business whose sales pitch is based on a premium to equity return. if you are buying fully priced assets, it's limited. erik: private equity fund

managers don't like to give money back. they are going to spend your it we don't see them rebated it. stephanie: as opposed to hedge funds? erik: we can cast a wide net around that. they feel obligated to spend it. their job is to find the best assets they possibly can. one of the things they are benefited by is the european stock market doesn't have a great future for the next couple of years. they are saying i think i can out crest that. is that going to out crest the rest of the equity market? stephanie: what kind of currency market do you see? erik: most of the money going into europe is coming from u.s. investors. they are being converted to euros. when the returns come back and get calculated, they are shown back in a dollar basis. europe is growing and returns are increasing.

we are losing all of that off of the currency offset. erik: except you're not looking to reap a return in six months or even two years. if you're looking at five to eight years, is that reasonable best and mark --? seven years from now -- by in cheap. if we revert back. erik: the currency will be interesting to watch payback. this is the rule of large numbers. there are so many find it managers in so many currencies there is natural hedging that takes place. today you feel the pain point of that strong dollar and weakening euro. stephanie: what is a rate hike going to do to europe? erik: the europeans have used a lot less leverage in the u.s. markets.

that's an issue around the buying of businesses. you pay full or equity prices and you're not getting the same benefit that the u.s. gets leverage. i think when you look at the u.s., that is cheaper and more plentiful. the pricing is lower than europe. if you are an investor, you have to see yourself tilting to the u.s.. stephanie: thank you, warren buffett. thank you for joining us today. erik: the plunge and commodity prices may be on hold for today anyway. were find that whether prices have further to fall. ♪

erik: apple is coming after the bell. so is yahoo!. some stocks in tech land are on the move. julie hyman is here to tell us why. julie: it's right behind me,

tesla is being downgraded this morning to a cell from a neutral. storage and auto volume growth are likely to disappoint according to the ubs analysts. we had a number of downgrades for tesla as of late. the of a cut it to an underperform. this happened this month. it's not been a good month. the shares are down by 4% right now. it's a different story for facebook. though shares are moving higher. they are getting closer to $100 a share. they posted a record. they are closing at a record. they report earnings next wednesday. bank of america is putting it on its number one top ideas list.

citing a number of different reasons, including strong up mobile growth in advertising and new types of advertising including the video opportunity. the instagram ad ramp-up. we could be looking at $100 a share. facebook went public and $38 a share. paypal is being initiated by different analyst. one of them is piper jaffray. we are trying to get ahold hold of that note to get more detail on that. the stock went up yesterday in its first day as an independent company. that seems to be more along the lines of the consensus view of paypal.

we will be right back.

>> live from bloomberg headquarters in new york, this is "market makers." with erik schatzker and stephanie ruhle. erik: good morning once again, everybody. i'm sure except scudder --i'm erik schatzker. stephanie: i'm stephanie ruhle. we have lots to talk about. erik: bank of america's perspective on the selloff and commodities. stephanie: first, we have to take you to the top stories of the hour. ibm shares are falling in premarket trading. revenue dropped for the 13th

quarter in a row. the ceo has been trying to overhaul ibm to be a seller. custom and caught, but it -- cutsosts are being cut but it is not doing enough. president obama officially assigned the dodd-frank reform act into law on this day in history. it has fierce critics on both sides of the political aisle. some say the new rules are strangling banks. others say it did not go far enough. earlier, we heard from the head of the american bankers association. >> we need to do some fixing. when one party passes

legislation virtually alone. in the case of dodd-frank and the affordable care act, very few republicans were involved. it is important to revisit it. stephanie: a bipartisan group is looking at ways to tweet dodd-frank. erik: nike has given its ceo i stop reward 10 times higher than what -- a stock reward 10 times higher than what they usually get. call it a retention bonus. ohio governor john kasich will become the 16th republican to enter the presidential race. he served 18 years in congress before being elected governor. his first test is getting into the presidential debate next month. he is running 12th in the polls right now. stephanie: it is a huge, massive

day for tech earnings. what are investors watching? michael welcome. great to have you in town. let's start with apple. the apple watch launched to so much fanfare. we have already seen sales drop 90%. >> by one survey that had certain biases. stephanie: i guess you are about to say you love the apple watch. >> this is one of the reasons why companies need to be private , the case could be made. there are a lot of great inventions happening today. apple watches the beginning of something that could be very interesting but it cannot be

measured quarter by quarter. even if apple watch cells zero in this corridor -- in this corridor -- erik: it cannot be zero. you have one. >> there is a lot of experimentation going on. the key thing on the apple watch his version one. everyone is going to be excited. apple has the fastest upgrade on any of their platforms with watch 2. one of the reasons it is very important. number one, it has a whole new it runs without the iphone. that gives a lot of flexibility. what i am saying is apple watch let's look at this next year and

that is the minimum time metric to look at it in terms of sales and reception. erik: ok. what does an investor do, then? if you think it is an important part of the apple story, what do you do? >> we look at the whole picture. erik: forget about apple watch? >> no, it is important, but there are a lot of legs in the current thought. we have iphone sales. i know it is boring. erik: you say the iphone is worth this much to apple, the ipad is worth this much, the mac business is worth this much. stephanie: after you break it on down do you love apple? >> i do love apple. it is interesting that public market tech has been doing much better, as of late.

that beat apple's one-day run of $46 billion. tech valuations are moving up a little bit. it is slightly closer in the private tech valuations. when people talk about a bubble, one of the argument for folks who said this is not a bubble is large cap, high-quality tech valuations are not inflated and they are starting to catch up. i am very excited about the core momentum in the iphone. the ipad has been slow and ready -- steady.

the big operating system upgrades are going to be additional legs. stephanie: everything we are saying is about consumer product innovation. is ibm ever going to get its groove back? >> there was optimism in ibm and apple doing a joint venture. stephanie: that ship just sailed. >> enterprise used to lead in innovation. that has flipped over the last 10 or 15 years. what we are seeing is a lot of very interesting technologies that are being commercialized. clout has been the latest bubble -- cloud has been the latest bubble. long-term, i am optimistic. short-term, they have execution challenges. stephanie: we are optimistic on

you. but we have to take a commercial break. michael will be with us when we return. we will be speaking about the latest reincarnation of microsoft windows. microsoft will be giving away windows 10 for free. is the strategy going to work? stick with us. you are watching "market makers." ♪

erik: microsoft and yahoo! will report earnings. michael is the founding partner of disruption capital. he helped companies such as yahoo! go public. let's talk about microsoft for a moment. i know you are a believer in the satya nadella story. does it make sense that microsoft trades at 18 times

forward earnings? >> there is a disparity. apple is pushing large numbers and it takes a lot of believing and conviction to say $1 trillion and more is responsible. what tim cook has said is don't focus -- you have to focus on the components. on the microsoft side, you see that they have made fundamental shifts. they have taken the hit on windows. they have started to offer some parts of windows on the consumer side for free. you can download windows 10 for free. that would have been heresy not too long ago. they have made a good transition with 365. the stock has been up. it has been up in the last quarter or so.

i do worry. people get excited about buzzwords. cloud computing has been a buzzword. they have had tremendous growth on that side of the equation. at the same time i do worry that expectations get a little bit ahead on a quarter by quarter basis. stephanie: do you worry that investors are emotionally investing. big-time investors with billions of dollars are may be blindly throwing money at some of these companies. >> a four letter word affecting everybody. fomo. fear of missing out. everyone is worried about missing out on the next big thing. stephanie: it sounds like 1999.

>> it can be if it comes from entities who have not had to make these changes. we talk about ibm and microsoft. one of the fastest ways to grow -- you have seen it done most of the time unsuccessfully. facebook did it successfully when they diversify their business with whatsapp and instagram. stephanie: and we saw the great value alibaba served for yahoo!. what doesn't alibaba-less yahoo! look like? >> we will have to see. marissa had one of the best gifts on her platter. several years to figure out what to do with life after alibaba. erik: and the stock is down 22%

this year. >> the jury is out all of that. stephanie: what do you think? >> i would like to see more there there at yahoo! i hope they have plans under the hood. alibaba has come down. the shiny is off that piece as well. erik: thank you. stephanie: is there a pun intended in there? michael, what a pleasure to have you here. the man who wrote the book on donald trump's finances is still to come. whether trump can handle being an outcast from the gop. would you call that book a mystery? a comedy? i'm not sure what genre it would fall into. erik: nonfiction.

stephanie: you are watching "market makers." ♪

stephanie: welcome back to "market makers." i'm stephanie ruhle with erik schatzker. let's check in on the morning headlines. i ran's foreign ministers face harsh critics of the nuclear weapon steel in his harsh -- own country. he defended the historic agreement as it was defended to iran's parliament. he said it was the world powers, not iran, that caved in the talks.

nokia is close to a deal for its mapping business. a sale to german automakers could be reached as soon as next week. nokia is asking for $4 billion for the unit. in an early primary state, donald trump should quit the race, according to a paper. "the des moines register" calls him a feckless blowhard. they said the degrading of john mccain's record was the last straw. erik: speaking of the donald we have a trump expert in the house. he is tim o'brien. tim wrote one of the early books on trump "trump nation." tim wrote a column today that you can read online at bloomberg.com.

i quite love the title and i encourage everybody to read it. stephanie: what to the trump is up with this? tell us. explain. >> the book looked at his business life and track record. the thing that stuck with him was the assessment of how wealthy he was. he claims how wealthy he is. he is a comfortably rich guy. but he likes being a mega-billionaire. stephanie: is he a mega-billionaire? i would like to be a supermodel, too, but i am not one. >> i think there is always a healthy dose of skepticism

needed when interacting with the donald. his valuations have been all over the map. the book captures the wild fluctuations in what he said his net worth is. as a billionaire myself, i was insulted. [laughter] erik: members of the republican party are calling this comment on john mccain's service -- >> they called them a feckless blowhard. erik: the last drop. is it in keeping with the donald trump that you spent time with? or did he cross a line? >> i think donald crosses lines as soon as he gets out of bed every day. i think he loves to live there. people have to understand that his role in this campaign is to simply be in the limelight. erik: he doesn't want to be president? stephanie: i'm sure he wants to be president. >> he wants to be heard and he

wants people to watch him. he is not a non-troubadour. he is not steve jobs. he is not bill gates. he is not michael bloomberg. he is pt barnum. stephanie: does he have any advisors? >> he has some people in iowa but it is a shadow network. he is his own advisor. stephanie: and potentially worst enemy. erik: we are going to have to have you back. the campaign is hardly over. he wrote the book " trump nation." read his column today at bloomberg.com. stephanie: nothing is better than a great guest who works here. ♪

♪ ♪ ♪ get excited for the 1989 world tour

with exclusive behind the scenes footage all of taylor swift's music videos interviews, and more. xfinity is the destination for all things taylor swift. stephanie: welcome back to "market makers." we are just a few minutes from the opening bell here in the u.s. the bloomberg markets executive

editor joins us with three things moving markets. welcome, madame. >> let's talk energy loans. we just at the u.s. banks report second-quarter earnings. we got an update on how the energy loans are doing. we had science bank say nonperforming loans were at $66 million. wells fargo said there was a $416 million loan increase driven by oil and gas. a lot of shale drillers have borrowed from wall street to fund their activities and now the banks are under pressure. they have regulators eyeing the energy books. the big question is, do we get the mini credit crunch in the energy sector? erik: of course, a meaningful increase and the price of oil --

>> those things are worth a lot less. a bunch of the companies have hedged their oil exposures. those hedges are running off. number two, let's talk treasury markets. we know we have been debating whether we go to september or december for a rate hike. they are pricing in the probability of having a rate hike. we are really vacillating between the december and the september hike. there is an argument that says if the fed is going to hike they might want to do it in september. erik: a lot of people believe that. >> there are so many schools of thought on this. there is another school of thought that says the fed does not need to raise rates. erik: i would point out that it

is possible the fed will go in between, as well. janet yellen said that people assume, but not necessarily. >> that would be eight turkey one. i would be curious to see how markets of handle that one. stephanie: unioo mas. >> let's take a look at the liquor market. stephanie: please. >> everyone's favorite. sales were down 9%. most of that disappointment is coming from china. fewer chinese wholesalers buying cognac. everyone is always curious as to how the chinese economy is doing. we don't necessarily trust official gdp numbers. instead, we look at what foreign countries are exporting. stephanie: i like that.

erik: look, it is a great indicator. similarly i would like to know if we are using booze as a benchmark, i would love to know what is happening to chinese purchases of first growth bordeaux. some people say they mix it with coca-cola. >> i volunteered to go on a research expedition for you to china. stephanie: we appreciate your commitment to bloomberg news. >> there we go. i hear the bell ringing. let's take us to julie hyman for a look at what stocks are on the move at the open. jules, you are not going to get to go to china for a cognac or wine tasting, but you can tell us which stocks are moving. julie: instead of drinking wine i get to talk about ibm.

i'm not sure this is correct. i'm guessing the stock is down. yes, the stock is down 4%. we have a bad print. ibm is down about 4%. second-quarter sales declined across all of its businesses. ibm has been struggling to make the transition from old tech to new tech. the strategy has not seemed to be very successful. the 13th straight quarter of declining revenue across all business units from services to software. total revenue fell by 13%. in addition to that, we are looking at united technologies. before we do united technologies, we are going to toss it back to you guys to get our graphics six. erik: we have a technical malfunction and we will take a quick break.

when we come back, we will tell you more about the stock market. stick around. ♪

erik: the commodities rut keeps deepening. what was leading the pack? gold. gold dropped yesterday, plunging the most in two years. it is advancing slightly today, but not making up for the losses it sustained. is this plunge going to sustain? let's ask francisco blanche. i'm sorry you could not be here, but we are delighted to have you. tell us what you think is going to happen. does the plunge continue? >> i think for the time being, it does. there are a lot of macro headwinds coming together to press commodities lower.

whether it is the weakness in the euro for the chinese commodities depreciating. i think it continues to add pressure on commodity prices. i think oil alone could take us down into september. i envision a few more months of commodity price weakness ahead. erik: you have been right about oil. when you say the weakness will continue, give us a number. >> i think it could drop a few more dollars from here. i don't think it is going to be as bad as it was back in march. gasoline is still trading very strong.

it is down from $2.20 per gallon. there is lower room to go for gasoline on the downside and that could drag down crude oil. stephanie: in terms of oil and gold, what are the specific drivers that are pushing prices? >> i think gold is a bit of a separate story. gold is a commodity that picks up noise from every market. what is going on and gold is that you have a weaker commodity market which is affecting gold negatively. you have higher interest rates, stronger u.s. dollar. to top that off, you have barely any equity market volatility. that tends to be a driver for people to go out and buy gold. you have a perfect cocktail of ingredients that are pressing

gold prices lower. we are sitting right at the cost of production for many miners. we will start to lose gold production if prices continue to drop, though. erik: you write about a decoupling that is taking place inside the metals complex. the prices of 10, aluminum, lead copper are not moving in step with each other. why is that important? >> it is telling us we are getting toward the last phase of the route. we are moving to a supply rationing environment. we have gone from a bull market led by china and chinese demand. now, effectively, soon -- prices

are falling to levels that are forcing supply rationing. it is that destruction of supply that is creating this the correlation exercise across metals. different metals price out at different points. erik: how long is it going to take for that supply destruction to rebuild fundamentals in the metals market to see prices rise? >> it is all dependent on the business cycle. we are projecting 3.9% global gdp growth next year. if emerging markets do pick up i think we could start to see more upside pressure on commodities. we need to see the first fed

hike in september or maybe in december to really start sending a signal for commodities. we are of the view that we need to see the first fed hike. stephanie: if we do see the fed hike, where do you see oil? >> in the prior section, you were talking about the borrowing termination. you were talking about banks slicing down the credit to banks. we are going to see a higher cost of money because interest rates will go up. we are also going to see credit spreads widening. a higher cost of money, a higher cost of credit. less loans are going to tighten

the supply side on the energy sector. i can envision a better market in 2016. the one flip side to that is how much iranian oil we will get. are we going to have a lot or are we going to have a little bit? do we need to see shale production coming back into the market next year. that is what we are trying to figure out. erik: people were predicting a credit crunch for energy earlier this year. why should it not happen again coming this fall? >> the reason is price. if prices stay low, we will continue to see price share on the market. i think the regulators are concerned about the potential systemic risks. i think the core issue is going

to be the low price environment. it will convince investors that this is not the time -- the need to be merged into larger entities or shut down. i think this kind of comes to an end in the next 3-6 months. it could last longer. it is hard to tell. erik: thank you so much. >> thank you. stephanie: united technologies is tumbling the most since 2011. i want to get back to julie hyman. what gives? >> their earnings.

they were selling the helicopter unit to lockheed martin and they are cutting the profit forecast for the second time is june citing weak demand and its other units. it is a problem if it is making this big sale and what it is left with is not working shares are at the lowest this year. aftermarket aircraft operations. if you are looking at your major units that are not selling as you would want, that is a big issue. the company just saying that it is going to be looking at restructuring here. in the meantime a big pain for the stock and for shareholders today. erik: thank you so much. now we will talk about a

revolution that is coming and it will change everything you know about cars. matt miller is here with more. matt: self driving cars will be commonplace within the space of a decade. at least that is what mckinsey and company are saying right now. automotive industry experts work there. dominic, thanks so much for spending some time. let me ask, first of all, i spent some time in an autonomous audi recently and they said it would be available within the next couple of years. do you expect those cars to come soon? >> most certainly. thanks a lot for having me matt. most certainly we expect cars that will do partial autonomous driving to be on the roads in

the next couple of years. matt: the headline number is how much time that is going to save us. we can then check our e-mails or eat doughnuts or whatever. the average human spends 15 minutes per day commuting? >> yes. when we talk about the 15 minutes, we talk about full autonomous driving. this is not what we just described. we described what will be commonplace in 10-15 years meaning the car goes entirely on its own. it is like a cab without a cab driver. you could turn around the seat and face backwards while you are driving. when this is the case, you do not need to drive your car when you are on your way to work.

it is 50 minutes every single day. 1.2 billion people driving cars every single day. it is two times the man hours it took to build the pyramid of giza. let's hope we spend that time in a meaningful way. matt: a lot of the technology is available already. it just needs to be implemented regulated, infrastructure. how long will it be before we get to that point? >> as you mentioned a lot of the technology is already there. until we have these cars driving on the road day today, a lot of other things need to be solved. questions like what happens if an autonomous driving car crashes into a tree? how do you decide where it crashes? we believe the full autonomous

driving, it is maybe 10-15 years out. matt: your take on the insurance case is interesting. we will no longer ensure the car -- the individuals or -- and the carmakers instead. >> we believe that the impact of autonomous driving is going to go far beyond just the automotive industry and insurance is a very good example. today, insurance companies ensure individuals against human error. if you don't try your car, there is no need to ensure yourself against human error. the companies that make the cars -- they need to be insured against technical failure. matt: there are two systems that

play right now. google has the system that relies on data from the street and other autonomous vehicles around. mobile light the israeli company that relies on the camera and a computer that reacts like a human would, which you think is going to set in first? >> i think we are going to see a fusion of all of these technologies in the end. today, safety is going to be the most important thing in driving. we believe that road safety is going to improve a lot with autonomous driving. carmakers will use the best of all these technologies to make it as safe as possible. matt: thank you so much. back to you. stephanie: thank you. when we return, colorado was the first to legalize the sale of recreational marijuana.

now, it is the first to advertise the drug on tv. we have an exclusive look. that is coming up next. ♪

>> his work is been seen by millions of people across the globe. >> you often find yourself looking at a form on the page. i realized the performer was having the most amount of fun. it turns the general public into the performer. to create artwork, it does not have to be huge on a large scale. you can do groundbreaking artwork on artwork as big as your hand. it is not always about scale or

complexity. it can just be about simple ideas that can change the world. erik: coming up this afternoon on bloomberg, it is david kirkpatrick the founder of economy media. he will be with us to talk about technology. apple, microsoft, yahoo!, the trifecta, all reporting after the bell. stephanie: the first marijuana commercial was set to air on u.s. television in the state of colorado first monday night, then it was moved to tonight now it has been postponed indefinitely. the advertisement hitting a legal nerve. state regulations have set the bar of acceptance very high. this is a bloomberg exclusive. a very first look at the tv ad before it airs anywhere else. >> that is exactly right.

we got a couple of seconds. it makes sense that the first television ad is going to air in colorado because colorado was the first to legalize recreational marijuana. it is one of 23 states that has legalized marijuana. i do want to get to this ad right now. let's go ahead and rolet. >> do you lead an adventurous life? always finding new ways to relax? now, enjoy the best effects and control. recreate discreetly this summer. recreate responsibly. stephanie: i love that they have edm in there. does we'd need advertising? >> people want to make money off of it. there is a ton out there. that added cost about $10,000 or so versus the 100s of thousands

that other ads could command. with that said, looking at this ad, what do you not see? you don't see we. not even the fate hand they are chuck -- vape bpen they are trying to advertise. erik: somebody must believe that this is going to bring people to pot. why does flomax need to advertise? if you are an old man and you cannot be -- pee you will know what flomax is. erik: people who want we'd have been growing it in their things for years -- garages for years.

>> we don't know when the ad is going to go out. abc at the local level, approach this company and said we want your ad. erik: hot specific advertising agency? >> is billed itself as the first pr cannabis company. erik: gwyneth paltrow is illegal, there was not an ecosystem of their this nature around it. stephanie: of course that happens. erik: people need bank accounts. stephanie: people who want to smoke weed find it. >> just looking at this, we don't know when it is going to air.

abc corporate put the suspension to the abc state level. the legality of airing a federally illegal substance on federally controlled channels. it is a thing between the federal and the state level. 24 states, including the district of columbia, it is likely to get even higher -- no pun intended. who knows where we are in five or 10 years. this might be something we will be seeing on air. stephanie: we will see. we have to see it there. that is going to do it for "market makers." ♪

>> it is 10:00 in new york city and 11:00 a.m. in tokyo. it could be the biggest ipo of the year. kkr audit at the high bio boom

in 2007 for nearly $30 billion and now they will take it public. erik: verizon vision. the company may be at the ending. what does the telecom giant really want to be? olivia: a tv commercial for marijuana. it was supposed to air on local tv last night in colorado until the network killed it. we will show it to you the very first time right here on bloomberg television. olivia: good morning, everybody. i am olivia sterns. erik: i am erik schatzker. olivia: stocks are moving lower after a disappointing earnings report from ibm and novartis. attention apparently turning away from the macros reset as grief and what is happening in china