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? 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 and what is greece

happening in china. analysts forecast of 5.3% drop in overall profits across the board. the nasdaq inching up a little bit higher but clearly the dow back below 18,000. erik: that would be largely because of ibm. disastrous order for ibm. stocks getting hammered. 13 straight quarters of disappointment. bigger ibm being a much drag on the doubt. -- dow. erik: another tough quarter for ibm. 13 straight revenue drop. specifically we are talking about declines in revenue is declining, a lot harder to make more money. trying to overhaul ibm to be a seller of computing technology and data analytics, and that is working, but only

off of a small base. the ceo has cut costs. the decline in services and software are the legacy business, and that is what is hurting the company. a shakeup at toshiba. several top executives are out and they will have to restate earnings for six years. announced after the closing bell in japan that the ceo and two predecessors will resign over the company's law and accounting practices, in which it is alleged top executives unrealistic profit targets and delays between losses. their resignations are effective immediately. a number of other executives, including today pay will also resign. toshiba has pledged to collect earnings by $1.2 billion. the share price rising six percent. toshiba makes appliances,

and also, nuclear reactors. john kasich will become the 13th republican to enter the presidential race, making the formal announcement later today. he served 18 years in congress the or being elected governor. the first test is getting into the presidential debate next 10th, because only the top will make it. olivia: the fifth anniversary of a measure that seemingly may know what happy. on this date 2010 president obama said the dog-frank reform act into law. dodd-frank. are say the new rules struggling the banks, while others say it does not go far enough. earlier we heard from the american bankers association. we need to do some fixing, and i think everyone would agree when one party passes

legislation virtually alone and in the case of dodd-frank and the affordable care act, very few if any republicans were involved. i think it is important to revisit it. group andbipartisan congress is now looking for ways to tweak it. goldman sachs looking to own and trade stocks directly in a saudi arabia market. talkank has applied force joining permit. the move would be allowed under a rule change that took effect last month. previously investors could hold them only through equities flops or exchange traded funds. 10e a stock grant almost times more than what he usually gets. parker is being reported restricted stock of a targeted value of $30 million. he will only get it if he stays another five years with nike. the co-finder -- cofounder will succeed him next year. erik: coming up in the next hour, m&a this year is up to a

record pace. goldman sachs is leading the way. it has arranged almost $600 billion of deals. we will hear exclusively from .he bank cohead of m&a have you heard of the free republic of labor land? not much more than the website and a plot of land between croatia and serbia and a new president looking for investors. verizon adding or than one million subscribers more -- one million subscribers per month. we begin with the payment processing giant. kkr, the big private equity firm, bought first data back in 2007 at the height of the buyout almost $30on for billion. -- the bayou explosion for almost $30 billion. yout. olivia: four ipo insight we

bring in kathleen smith. renaissanceager capital in joins us on the phone. thank you for taking the time to take with us this morning. starting with the macro picture, is this a good time in the markets for kkr to be taking first aid of public? from an ipothink perspective, a company like this and other lbo-backed companies that are starting to lineup have waited until the economy look are mored investors willing to put money into ipo's, the market for newly public companies have been fairly robust, especially as we have gotten into the middle part of this year. so we think investors are going to take a good look at first eta. first data. olivia: what do you think it is worth?

kathleen: that is a good question. we expect this to come some day after labor day. and will put a range on it, we will study it. the question is could it be worth much more than what kkr paid for it. that will be the challenge for the company. they have 20 billion in debt and all the proceeds will be used to pay down debt. we are using multiples and if you are conservative you may get a valuation below the lbo price. erik: that is precisely what i wanted to get with -- get at. what is your point of view on binding stocks that are not venture capital backed? facebook.t the next this is an old company that has been around for a long time trying to reinvent it so. it was levered up like crazy and kkr had to kick in more equity just to keep it alive. how attractive of an ipo is that?

we cannot forget there are attracted lbo-backed companies that come to the public market. the key question is growth. daddy went public this year and that company with .everage but showed growth investors were willing to invest in that company for growth and the stock did well. party city another example of that. i think some of these " more traditional businesses" as long as they are growing, investors do not have a problem with leverage. thehe case of first data, major question is how will they improve the topline growth, which has been fairly meager so far at least looking at the last quarter? it has been pretty close to flat. we need to see the company's pathway to growing the revenue and earnings.

but topline growth is key here. perhaps kkr is happy just to break even. at $27 billion investment they pped that a one-point was valued at point seven cents on the dollar. erik: do you get the sense that there is a risk kkr is bring this company to market to early ye? investors are eager to get their capital back, and when it's a investors, i mean the limited partners. kathleen: of course. they are in business to make an investment. i will say the public market can sod a price for first data, there is a clear price. erik: there is only going to be a clearing price. the question is high or low it is. -- how high or low it is.

kathleen: we cannot rule out, this company is a dominant company in the industry. the issue is the industry is changing and how it can rope and adapted the changes in the industry. i think paypal is a good example of a company that set itself right on top of the payment processing industry where consumers are willing to work banksaypal and not their to do online transaction. that is a key shift in consumer behavior but all the banks have to adapt to and first trust is a partner. consumers are willing to use digital wallet. that challenges the traditional businesses. companies have fought battle. i am sure they have a strategy for fighting this battle. olivia: i am wondering if there is a difference in consumer appetite. people know the name paypal. they do not know the name first

data. smith, joiningn us on the phone from greenwich, connecticut. erik: coming up, my exclusive interview with goldman sachs cohead of m&a. ♪

olivia: good morning, and welcome back to bloomberg "market day." i am olivia sterns. erik: i am erik schatzker. stocks up to a mixed art. thee hyman has some of biggest decliners. -- stocks off to a mixed start. it has been downgraded by a number of recent analyst

lately. getting less and less bullish on tesla. it is going back 5%. the downgrade coming to a cell. $210. --the downgrade coming to a sell. new competitors coming to the market. rising cost and funding the that will be challenging tesla going forward. a map of the analyst estimates. the red is sell. beijing is neutral. green is why. we have not seen the sell side analyst this negative is the beginning of 2014. ratingswhen we had sell at 25%. now 21.5%. incidentally when we were at the 25% of analysts who cover tesla negative, stocks rallied 80% since the beginning of 2014.

get perspective. also declining, united technologies. the biggest one-day drop in two years. down nearly 7% after it cut the 2014 profit forecast of the second time since june. selling the helicopter unit to him lockheed martin. that announcement made yesterday. businesses are seeing weaker demand than anticipated. olivia: you're today united technologies down a little more than 10%. moving on, and initial investigation -- you know what, i feel like talking about m&a. you want to talk about m&a. 2015 if you have not looked could be a record year for mergers and a decision. here we are the middle of july and $2 trillion of deals have been inked. the high water mark back in 2007

3 $.8 trillion. you will find the familiar name at the top, goldman sachs number one globally. earlier today and he and i hope with the head of m&a, gregg lemkau. gg: the activities on patch to match what we did in 2007 and elevating through the years. in theone trillion second quarter. the pace seems to be accelerating and the kind of transaction we have seen and what we see in the pipeline indicates that will continue through the rest of the year. scarlet: show that give us concern of what is happening? g: the nature continues to be smart transactions. stephanie: didn't we think that then, to? o? >> in 2007 what we saw was an lbo asset. i think the trend we are seeing

the biggest corporations taking advantage of the low interest rate environment to do smart consolidating industry defining transactions that help drive growth in a low organic growth rate environment or cost savings. the easiest thing to do is look at the total of deals announced and deals completed and try to pass judgment on the basis of those data points alone on whether the market is hot or not. what metrics saying more to a banker like yourself about what is happening in the m&a business? greg the thing everyone looks at other globally table. probably the least important that the three metrics we look at. the second, the number of deals above $500 million. we look at it in terms of volumes of activity and market share. the last piece are the advisory piece. what people pay for advice.

they are paying for advice. advisory fees are up toward a record this year compared to where they were in the past. is that the total fees taken or percentages? is the increase due to the threat of activism? >> i have not show the increase in fees is due to activism but the increase in activity is partially driven by the threat of activism. shareholders are generally more active. to dore forcing companies either proactively to help not get under attack or reactively when they do come under attack. erik: you said earlier the kinds of deals getting done now feel better than they did back in 2007, possibly better than 2000. what does not feel right? >> the transactions are getting done feel positive.

we have never seen the price going up. going up they usually get discounted. right now the market is getting credit for the accretion in the transaction and giving credit ahead of time for the implementation synergies. meaning the market thinks the deals will go through. the deals will go through and that synergy will be delivered. that has been a change for the past five years. there is some long-term investors. people have to find someplace to put their money. a are not necessarily voting with their feet and selling. they are trying to influence the outcome. of m&aregg lemkau cohead at goldman sachs. olivia: interesting conversation, particularly the buyergetting -- the stops.

too many investors are getting the binding company credit. that is interesting. one of the few things that give composite. i asked him if goldman sachs whatever advise and activist yet so he more or less it lanes if you show willingness to advise people who in some cases want to take companies apart, you cannot walk into someone else's wardroom and trust it. olivia: some activists say they are not trying to take companies apart. you are not going away. going to stick around for a little while. olivia: much more on the bloomberg "market day." don't go away. ♪

olivia: ask any president, running any country is no easy

task, but how about starting one from scratch? that is like he is trying to do in a tiny patch of land between croatia and serbia. we went to the free republic of erland.a >> hoping to be the next president of the free republic of liberland. >> people ask me, where do you go to set up your own nation or state? you don't get permission, you just go ahead and do it. smallfounded it, and -- a patch of unfounded land. anybody can use any currency whatsoever. there are only going to be voluntary taxes. it will be run by a crowdfunding campaign. >> it would be the third mollis -- smallest sovereign states in the world after the vatican and

monaco. >> legitimate just like any other nation in the world. we already do have a government and diplomacy. croatia government decided they will block off the authoritarian them all sides. despite this, raising over $45,000 through crowdfunding and attracting private enterprises like the settlement corporation. it has offered shares at west -- one swiss franc herpes. >> i put on a facebook post saying here is 100,000 shares into fewer inches and inviting, outact and they were sold in 40 hours. >> this money funds the work of the settlement association.

like they are running out of options. they are running out of options. >> of movement that is gaining traction all over the world. registrations around 365,000. 8000 people from the united states. 5000 people from russia. excepted if we everybody, we would be larger than iceland. >> it maybe a long way from becoming a real country, but to its founders, it is only a matter of time. ♪ olivia: i have to say, i do not know about the croatian border guards. $45,000 in crowdfunding. olivia: amazing. the internet really brings out

the crazies. a little rude. i did not realize there was so unfounded territory. sounds going to visit?e like it is kind of difficult to get there. much to discuss. thank you for joining me. i will see you tomorrow. much more ahead. we will take a deep dive into .erizon signing up more than one million new mobile customers per month, about double the pace they announced a quarter ago. the question now, what will they do with aol? is a wireless company anymore? ♪

olivia: welcome back to the bloomberg "market day." a muggy morning in new york city but 84 degrees and cloudy. worldrom bloomberg

headquarters. now time to take a look at the top stories crossing the bloomberg terminal at this hour. diplomatic relations between the u.s. and you but getting back to normal. yesterday the cuban flag went up over its embassy in washington, d.c. more than a half-century after it was taken down. several hours later john kerry made it clear at least for now the u.s. will not negotiate over its naval base at guantanamo bay. at this time there is no discussion and no intention on our part at this moment to alter the existing treaty or other arrangements with respect to the naval station. olivia: cuba's foreign minister returnantanamo bay must to cuba before relations can be completely normalized. foreign minister faced harsh critics of the nuclear weapons deal in his own country. he defended the historic agreement as it was formally

presented to the parliament. iranlled for around two -- to cease making nuclear weapons. an influential newspaper in iowa calling on donald trump to end his bid. the des moines register called him back with blowhard who should end his lobby sideshow. he said his remarks criticizing john mccain. surgedor his part has into the lead for the republican nomination. he asserts to the leave. a new abc news washington post poll shows trump is the favorite of 24% of republicans and those leaning that way. scott walker in second at 13%. has 12%. those are the top stories at this hour. still to come, a marijuana advertisement was supposed to

air in colorado last night that has been suspended. we will show you a clue what that commercial looks like it lucidly. breaking down third-quarter earnings after the bell. ofwill not break out sales the apple watch. does that mean it is not making the company. if john kasich will join the crowded presidential field today. qualifiedthe most candidate will never heard of. verizon winning the wireless force? -- wars? for years we have watch the competition. consumers have benefited. today verizon said it is signing up 1.1 million new subscribers each month, roughly double the pace of user growth from last quarter. also posting second at a profit that beat analyst estimates and said chief tablets are helping new customers. i want to bring up the equity

managing director. thank you so much for joining us. what stands out to you? the results were quite good but verizon is clearly managing the business very conservative. they are also focusing more on content as the regulatory environment disfavors network elders like verizon and favors content couples -- content writers. the big event will be so-called over-the-top video offering they will optimize for mobile. olivia: that brings up the question how the business model of verizon is changing. is it rare to say there is a chance? on the one hand a real step price competition between and sprint. on the other hand, verizon is signing up a lot of new customers and protect and profitability. i would say neither are

fighting a war. the other carriers you could certainly say that with aggressive pricing. verizon is sticking to its game, that were quality and raise to -- is more trafficphase two more traffic. olivia: i am talking about wireless customers. you are talking about the future and over-the-top television. what does verizon want to be ? >> they probably have the best network out there. these are very high on the network. game is to the return capital to shareholders is to drive more traffic and revenue on the network. who is the direct competition for the new transformed verizon?

>> i think at&t is very much a direct competitor. you are bringing in a company like google and netflix as all of these company -- companies compete for the consumer dollar. they start to think about access to the internet whether it is wireless or wireline and purchasing content. they look at ways to divide of spending. olivia: it used to be at&t versus verizon. looks like they are pursuing different paths. they will have a unified content bundle. the wireline platform. the wireless platform or any platform it will be unifying content bundle. they are building a content bundle themselves with a low and the number of content deals they have already announced. >> verizon selling the huffington post? i think it is

interesting content. think they ought to keep it in see how well it fares putting the new content on aol wireless device. olivia: what is the tsongas -- ?trongest stock in the sector >> i think>> it is clearly at&t. mexico is a huge new offering for them. i think at&t will probably have stronger growth in the next five years, certainly than verizon. why are you bullish on ie tie up with directv? >> think they can do a lot of things with that. they will now it and the wireless broadband network to sell broadband to the directv customers. now they have a unified offering. whether you want wireless, voice, internet. at&t can get that to you on a national basis. and it is cheaper.

michael stein. telecom analyst at drexel hamill . appreciate that. still ahead, the s&p 500 had a neck -- another record yesterday. history showed it probably should not. ♪

olivia: welcome back. we are one hour into the trading session in new york city. 10 to get you caught up. i want to start with europe. a very different picture to yesterday in europe. getting straight to the map. the kleins pretty much across the board.

the stoxx 600 equity benchmark snapping a nine-day rally, the sincet winning streak april 2015. health care stop dragging down the benchmark today. greece and commodities, everyone talking about that but also earnings. one of the biggest losers. they have had production issues. operating income missed analyst estimates. that send the stock down the most since 2012. 's drug maker world in terms of sales, 7% decline in second-quarter earnings. stronger dollar. also, the ceo said the m&a spree in the u.s. health insurance industry not help all for drugmakers, making it harder to increase prices. are pretty positive

about the outlook for corporate earnings in europe now that we are into the earnings reason. lower borrowing costs, energy prices and improving economies and of course, this. yes, we see the euro rally against the dollar today, but look at the bigger picture. down more than 19% across the dollar over the past year. at stops ing a look the u.s., a mixed picture with the dow the clear underperformer. the s&p and dow and nasdaq lower. down almost .9%. very clear when you look at why. the three worst performers all due to earnings are really dragging on the index. the dow is price weighted versus the s&p 500 market cap rated. united technologies coming out with earnings disappointed. selling the helicopter unit to lockheed martin. says it is remaining businesses

are not performing as well as expected. 13 straight quarterly decline. verizon added more subscribers. forecast forales the full year. cutting price competition from competitors. the commodities complex coming back a little bit. turned the work. it was rebounding. crude oil has been rebounding as the dollar turned lower. if gold continues on that door turns around and goes higher. for now, the boost in energy is helping energy stocks. that is helping this them into clients in the s&p 500 or little bit of both or. exxon mobil and chevron rebounding. slowa: finally feels like

-- summer. volume a little bit lower. thank you so much. in asia the shanghai composite closed up for a fourth day hitting 4000 for the first time since july 1. the hang seng off by half of a percent. the nikkei rosanne cheaper oil and weaker yen. one big story, a seven and two china's ipo has slammed the brakes on what was of the inner year for brokerages. doesn't of shares sales suspending hundreds of millions of dollars in fees that have corroborated. the sudden halt of ipo's came brokerages with nearly 40 company still in limbo. that is lend gone for now. areto mention costs so-called national security securities that had to

contribute to cover -- government led efforts to prop up the market. investors have very priced and weaker profit growth for the rest of the year. that apply for shares have trailed. 40 from hong kong. nokia close to a deal with a group of german automakers. bloomberg reporting an agreement, reached as early as next week. daimler would be the buyer. nokia has sought as much as $4 billion for the maps business. verizon reporting second-quarter revenue that fell short of analysts telecast. 32 $.2 billion, two hundred million dollars short of estimates. earnings per share came in three cents better than forecast. the company directing -- expecting revenue growth of at least 3%. apple releases earnings after the bell. investors will have to dig revert to find out how many

apple watches were sold. watch sales will be included in the other product category. those are your top stories at this hour. the s&p 500 hit another all-time high closing at 2128. if you look at the past six years, the s&p posted record highs in 53% of those years. what that means for your investment strategy, mike regan joins me to discuss. is my take away here that a market top is not a sales? a record is not a sales signal. that is the problem, you hit a new record high and you think this is the top. most tops are at record highs. in retrospect you think that was the top. what that neglects is all the records you hit on the way to

the one that finally becomes the top. for example, the s&p or set a new record in 2013. at 35%.en, it is it has set 100 a record since then. yesterday briefly closed above the record. is the record. a little trouble getting there yesterday. this basically makes people nervous. you are so ingrained to buy low and sell high. history really proves that not to be the case. since 1946 it has been at a record at some point during the year in 37 of those years. quarters of the time after reaching a record, it is 12 months later. it is kind of counterintuitive but buying a record highs not necessarily a bad idea. olivia: not necessarily a sell

signal, a hold signal. a signal you have to evaluate what all the other signals. a lot of people get nervous when a new record is hit. it is not necessarily a bad idea to keep buying. getting back to the s&p at 2100. and the nasdaq back at 2000 levels. it is hard psychologically to want to buy back in. mike: this year of boring market. interesting how boring it has been. olivia: it has been moving sideways. right. a lot of people believe instead of having a correction that is correcting over time rather than price. this flat market is almost with a correction in itself because instead of getting overvalued and overpriced, it has corrected

overtime they being flat. the last record was 18.8 times earnings, which is historically -- it is on the high side. 14% above average. what you have to do is compare it to bond yields. fromrofit being spun off the s&p 500 is 5.3%. double the treasury yield and that explains why people are comfortable with a higher than average valuations. olivia: what are you writing about? will have greece another band-aid for the next couple of months. the equity selloff has stabilized. what are big actors striving equity investors? one thing is health care stocks. they have really led the market this year. you think of health care stocks. it is something you go to and the bear market. the percentage they are making

up for the entire market is about 15%, levels only ever seen before in bear markets. this time health care has come out that the traditional bear market. so it is sort of shows off with this label. olivia: interesting stuff. if you are looking at the s&p had a record high, not necessarily. our stocks editor, mike regan. don't go away. much more including a tv commercial for marijuana. the controversial ad was supposed to air last night the network office pulled it. you can see it right here on bloomberg tv enough. -- bloomberg tv next. ♪

olivia: welcome back to the bloomberg "market day." a monkey muggy tuesdayg -- morning. last night the first brick reaction -- recreational marijuana ad was supposed to be aired in colorado. the network killed it. the substance the federal government still says it's illegal, even if it is allowed in colorado, the federal government says it is illegal. the advertisement is not survive

can of his company. a first look at the tv commercial before it airs anywhere else. that is exactly right. the interesting back and forth and, the ourd the company and basically the e join t. i just made that up. we are not sure where it is going to go. before we go into the details, take a look at that right now. >> you lead an adventurous life. always finding new ways to relax . now enjoy the best effects of control with the new pen and recreate discreetly this summer. recreate responsibly. r relaxing.ooks reporter: what do you not see?

you do not see marijuana or even the pen. of coloradouse state ball. in addition to that, colorado's eight law says there is a 70-30 rule. basically 70% of the tv demographic here has to be 21 years of age. if they need that, they can show the ad. we see this back-and-forth between the federal government as well as the state. olivia: cigarette companies are banned from the airwaves. there are clearly a lot of federal limits around this. telling me earlier it was the local affiliate that reached out. they were the one that wanted the company -- the business. firster: colorado the marijuana.galize they approached the company and said we want to show your stuff on air. i spoke with them and they said

omg, we need to take the bull by the horns. they put the ad together in just a couple of days. brand said we need to take the bull by the horns. it is in limbo. we don't know where it is going to go because abc or brick has said they are not sure about the legal issues. olivia: of course. the companies in colorado i understand they are still thinking with cash themselves because many of the banks will not do the commercial transactions for them because they're worried about federal law. reporter: financial institutions are really not sure on whether they can take the money and either keep it or invested someplace else. print pot have seen ads. will we see a lot more ads? reporter: personally i think yes. 23 straight -- states now have

some form of legalized marijuana, whether recreational or medical. you can say this just say know, yelp of itself as the pot. you can look at each different strain and say this will help me with this information or this will help me for this pain in my side. this ran in " the new york times." olivia: there are some that do it. the product. thank you so much. thank you for the exclusive. still to come in the next half at the closing bell. the first ends they introduced the watch. will they tell us how many they are selling gekko probably not. ♪

. .

11:00 in new york, 8:00 in san francisco and 4:00 in london. was apple watch a bust

question apple reports after the bell today but it will not the breaking out specific numbers for the timepieces. olivia: ibm selling off after another quarter of falling revenue, making it the 13th straight quarter of falling revenue for a company trying to remake itself. and lucky number 16? ohio governor john kasich officially jumps into the race for the republican nomination. what does he have that the other candidates don't? olivia: good morning, everyone. scarlet: let's get to the headlines this hour. greece is european creditors have agreed to ease repayment terms if the gr