stephanie: the party is about to start. good morning. i am stephanie ruhle. olivia: i am lucky because i get to sit like -- next to this one. here because of the actual news. so much to talk about. we will dig into earnings. apple, yahoo!, microsoft boeing just in the last half-hour. >> we have got the best analysts in just a few moments. why he says this morning is the time to buy. before we get to that, the top news stories of the hour investors would like to know whether the hits can keep on coming for apple. this morning, they appear to be skeptical. shares of apple have fallen after iphone sales rose 35%.

its stillness estimates. the sales forecast came up short as well. they were planning on selling a lot. sales of the new apple watch were less than what analysts had estimated. ceo tim cook says the company is pleased. tim cook: sales of the watch exceeded our expectation despite supply still trailing demand at the end of the quarter. to give you additional insight through the end of the quarter the apple one sold higher than the comparable launch times of the original iphone or the original ipad. >> 73% of old iphone users have not upgraded to the latest device. plus, more than double, more than apple coming up in a few moments. olivia: boeing's cash flow is

surging thanks to the 787. earnings beat analyst estimates. they lowered their forecast for the year. also out beating earnings estimates. increasing prices and cutting expenses. it is a nice combo. the price hikes helped offset falling sales in the u.s. and stagnant demand overseas. at&t's proposed takeover of directv has cleared a hurdle. tom wheeler has weighed in and urged fellow commissioners to approve the deal. the same time, he demanded the company do more to spread broadband use. vote on the deal as soon as this week. and there has been a takeover in the medical device industry. they agreed to by sporadic which makes implants for hearts. it represents a pretty premium

40%. the average price in the past month. stephanie: this story is crazy town. two software developers proved they camera mostly seize control of a moving car. the white hat hackers demonstrated their software for wired magazine. they were able to disable the accelerator and breaks even though they were over 10 miles away. they even tuned the radio. the hackers did not reveal the car manufacturer. they said their hack affects cars made by fiat chrysler. i hate that story. those are your top headlines. that is legitimately terrifying. that is exactly why we need to have drivers behind the wheel. olivia: i will tell you i am not your favorite driver. but that story makes me worried.

let's give you the top five things you need to know. how'd you invest without knowing this? despite apple posting is profit, shares -- best profit ever, the shares are lower this morning on a missed target for the iphone sales. sales climbed 35% but the results fell short of the 48.8 million shipments projected by analysts. the news is weighing on shares of apple but also global tech stocks. just yesterday, this was a man who started tech banking with goldman sachs and he said it is way too soon to evaluate the apple watch. we have just seen it in stores. come september, they have got upgrades coming, a new device, and the fact that so many users have not even gotten a new phone -- >> 75% of iphone users have not upgraded yet.

tim cook said the launch of the apple watch has been as successful as the ipad. that stuck out to me. i was surprised to hear that. olivia: my big take away was for the first time ever you heard tim cook talk about the crossover rate. talking about competition for the first time ever, how many people were switching over from android. number two, more tech earnings. also falling in the premarket this morning, investors were not impressed with the results. the turnaround is still taking shape. the company's forecasting sales in the current corner below analyst estimates. in microsoft, the company posted its largest ever quarterly loss. the shares are down nearly 40%. taking it on the chin again.

but yahoo! was interesting. marissa mayer's actually making a little bit of money here but she is eating a lot of expenses and paying to get that traffic for the yahoo! search. >> think about what they want to do in terms of contract creation. i do love yahoo! weather. i do. let's give you number three. julie hyman. have you ever used yahoo! weather? julie: i do not think so. i'm sure i'm not alone. number three is commodities. keep our eyes on that. the bloomberg commodities index slipping back to the lowest level in 13 years. and gold falling for the 10th straight day. that is the longest losing streak since 1996. there was also a call from gold

commodities. the worst is yet to come in the prices fall below $1000 an ounce for the first time in years. you might want to listen to him. also, the world's's biggest miner is falling this morning following comments from the ceo. three of its four from materials . the slump in commodities has been incredible and it is not stopping. >> people are talking about china and i have got to give you number four. seeing red today, those investors in china. the hang seng index to climbing already, becoming the worst performer this month. investors are concerned the nation's slowing economic growth will hurt earnings and state intervention in equities will delay market reforms.

think about all the big investors we have seen in the market super bowl up on china specifically the capability of chinese consumers. this decline we're seeing cannot seem to find a turnaround. olivia: despite all of the money they are throwing trying to stabilize, shares down 9.5% so far. stephanie: how does this girl do it every day? olivia: because chipotle ran out of carnitas. chipotle posting second-quarter sales that trailed estimates. now they are at 1% in the premarket. a huge move in the shares. at one point yesterday, they own as much as 10% in trading. what happened? the restaurant raised prices last year to offset higher beef costs and this credible -- critical pork shortage. stephanie: i'm never in the

market to buy a car need up. olivia: you do not look like you have been eating many of them either. stephanie: it weighs like five pounds. olivia: same sale -- same store sales. look at this. 4.3% same-store sales growth for this quarter, well short of analyst estimates. this shows that you pull a dream story is petering out. stephanie: more news, how about that? on apple, the senior animist -- analyst at piper jaffray says this is an opportunity to buy and he joins us now with more. why are investors punishing apple? >> it is the power of the whisper number. you mentioned in your set up the expectation 49 million iphones. if you are just 48.

it seems like a nonevent but for investors, it means that even though it is just a slight miss, the idea that there may not the big upside in the future is why the stock is down today. i think this is just an overreaction. stephanie: is this not a wall street curse created by the prospect? forget analyst estimates, how about a real investor looking at the company's true fundamentals for a change. >> it is a curse and unfortunately it happens with a lot of successful companies when they start to train investors to expect the big upside. i think it is a curse on days like today, but ultimately an opportunity because for investors that believe in what is going on, the bigger picture, market share gains if you believe in that, yes you have to put up with volatility on days like today, but there is an opportunity to own at a discount. olivia: comedy shares are left

in apple for the rest of the year? >> we look at it over the next cycle. if you assume you get back to the margins that they had in previous cycles, there is about 16% upside. there is still some measurable upside just along the market profitability. and in the watch expectations are now pathetically low. so there is probably room some -- four surprisingly upwards numbers. >> how soon before we could actually evaluate the success or failure of the watch? >> probably a year, not what investors want to give it. think about how categories progress. i recall when the iphone came out, there were a few quarters were people thought the iphone would be a dud. this is a new paradigm. wearables is something different than doing something for

desktops or phones. it will take time for developers to build apps that are native for that. over the next year as the high-performance apps come out that will start to build excitement. give it a year. olivia: iphone sales grew 87% in china. we're calling this a disappointment. our analyst was on earlier this morning saying the question is whether or not the slowdown in china is temporary or structural. how strong is apple in china? >> they are killing it in china. talk about iphone growth. with 70% in the quarter. they showed a little bit of an acceleration. 30% of apple -- of apple is rob revenue. the only way to look at china negatively is to say, more impact than they would in the past. the good news is china remains one of the biggest opportunities for apple. the market share is below 10%.

small changes can have material impacts to the business. stephanie: ipads. >> part of the problem is starting to steal some of the ipad roles. it has been one of the bigger mysteries over the past year what is going on with the ipad. we think there is a larger factor coming out. i do not think that will change the narrative a category that is not very exciting. stephanie: do not go anywhere. we have a lot more tech to cover when we return. we will look at what burress a myers still needs to do to reboot yahoo!. stick with us. ♪

stephanie: the ceo of jet.com

will join us at 2:00 p.m. eastern time right here. how about i give you some top headlines right now. olivia: senate republicans may try a new strategy for changing the dodd-frank law. senator richard shelby's is he wants to soft and dodd-frank rules for regional banks. blumberg news reports republicans may add his basel -- his proposal to an unrelated spending bill. that made democrats angry. they say the proposals weekend detections aimed at inventing another financial crisis. in greece, the parliament will vote today on the second packet of austerity measures. once again, the prime minister

will have to ask for support for opposition for lawmakers. his own party rebelled against new tax hikes. just place the biggest order ever. 50 of these planes, priced about $10 billion. the seven 67 was developed back in the 1980's. those are your top headlines. olivia: all i can think about is "castaway" with tom hanks. stephanie: is that with the volleyball? wilson? olivia: yahoo! is down, sales trading about 2%. the senior analyst is still with us. he has an overweight rating for yahoo!.

yahoo! revenue is rising 15% the highest quarterly increase in almost nine years. can you say marissa mayer has gotten your out of the woods? >> not yet because there are so many forces working against yahoo!. the core business they are talking about. for example, the acceleration of video. mobile is still something that is more of an opportunity. facebook is doing all of the obvious things. you have got to give her credit that she has made a ton of progress in the last you. >> she is paying oracle and mozilla a lot of money to in that traffic. >> that is h strategic -- a strategic decision. i credit her for being

progressive -- aggressive and have them think more. that is what she is doing. it is just what is going on with alibaba. that is probably more topical for a lot of investors today. stephanie: what is left former assistant terms of alibaba? >> they originally talked about the spinoff of alibaba being a tax-free event back in december of last year. more recently, the irs decided they would review this on whether or not this would be a tax-free spinoff. this is a big number. essentially, they could not say much on the call last night because there is really nothing they can say. that means patience is a virtue

here. we think ultimately, it will rule in favor of a less taxable event and that should be positive for yahoo! shares. olivia: we looked even down the road, her legacy, will the key be the financial hearing? >> unfortunately, that is probably how it stands today. the stock has gone up a lot under her tenure and a lot of that is how she has managed alibaba. olivia: what is yahoo!? is it a search company a video company, a content company? is it a news organization? what you think it should be? >> it is a content company and ultimately, whether it is sports , fantasy, financial, katie couric, all that stuff is content.

>> thank you. do not go away. ♪

>> i just want to report on a deal. home depot, 1.6 3 billion u.s. dollars currently owned by goldman sachs. it is based in jacksonville florida. 300 employees. maintenance repair and operations water connectors and so forth. home depot buying interline brands, $1.65 billion from the private equity group. back to julie hyman. >> time for future in focus.

we're watching gold as the route rages on. gold futures are trading for a tense day in a row. the prices have fallen every session going back to july 9. as the fed prepares to finally raise interest rates, they continue to fall further out of favor. bob, after the incredible downward run we have seen, is there a floor anywhere in sight? >> resistance is very interesting. a lot of time people are looking for a floor to buy and cumulate things. it might work with something like apple but in terms of gold, when you see something rising as quickly as it did in 2007, you knowing move is coming. i am targeting as low as 850

sometime in the middle of next year because i do not think it is there any longer. they actually asked me about gold. i thought he was talking about -- i did not think anyone should be investing in gold at this point. olivia: is there any actionable investment to be made? do you just forget about it and look at other stuff? >> you forget about it for now. he did -- two things for me about gold. it could reach that $1000 level. a lot of holders will take that opportunity to sell. that is selling out in the lower amount of purchases caught a lot of investors by surprise.

you may want to get out or you want to accumulate the actual physical battle -- level. a short-term 5% pop or a doubling of the price by 2020. those are the only things you could do with a metal. it does not produce a dividend. olivia: do you see an opportunity anywhere in metal futures right now? plus i like copper in the short term because it has the opportunity to bounds in a strong way than gold. what you are seeing in dollar strength potentially coming with the fed rising rates is you are seeing the potential for down the road, one thing we know about qe is it helps to boost the asset prices but is a lot slower with economists bid economists would benefit if they were more effective in china and japan than europe.

stephanie: all right. bob talking to us about futures on metal this morning. not much optimism in gold expressed by bob or really anyone else at this point. thank you. we appreciate it. olivia: jeff saying he thinks gold could go down. time now for the top stories. we will start with apple. apple had a big quarter, a huge quarter, by anyone else's standards. it just was not enough for apple investors. shares are trading lower this morning, as much as 6% in the premarket. the company is posting record third-quarter profit. iphone sales rose by 35%. the issue was the sales missed analyst estimates. sticking with tech, shares in yahoo! are falling in the p market this morning. forecast sales in this quarter

missed analyst estimates. marissa mayer has been trying to turn the company around investing in mobile features and video sales in the new areas grew 60% in the second quarter. >> searches half of our business. we have been investing modestly here in algorithmic technology. in q3, we feel the platform was able to take on increased traffic. olivia: yahoo! has benefited hugely from its 50% stake in alibaba. west week, this dinner -- a spinoff and shares. a big bet on an experimental drug for alzheimer's. we will learn more about it today at an industry conference. the drug could be the first marketed treatment to keep alzheimer's from getting worse. there is nothing on the market right now for dementia that has been proven to work. it is estimated they asked

spending hundreds of millions of dollars to develop this drug. workers in new york city's airports today say they are going ahead with a strike tonight. more than 1000 baggage handlers and security officers will walk off their job at the jfk airport. the workers want their pay raise to $15 an hour from $10 an hour and those are your top headlines at this hour area still to come much more including j.p. morgan and the u.s. government pointing the finger at the russian government last summer. it terms out they were dead wrong. we will find out who the digital misfits tied to the crime really are next. ♪

stephanie: it does look sunny

and beautiful, but i will guess it is really sweaty. not so sweaty here in new york city. bloomberg headquarters where you are watching market make is. i am joined by olivia sterns paired erik schatzker is out sick and we are talking about one of my favorite subjects banks paired when jpmorgan was hacked last summer, the bank and u.s. officials blamed the russian government for trying to undermine u.s. financial systems. it turns out they were wrong. authorities in israel and florida arrested four people for low-level security fraud crimes but who also have times to the jpmorgan hacks. jordan robinson covers cyber security for bloomberg news here you say this is not the arrest the fbi was hoping for. jordan: it is important to specify, when jpmorgan discovered a breach last august of last year tito's pacific individuals were inside the banks to blame the russian government.

cap two cyber security executives. as the subsequent year has proven it was far from the russian government or the guys arrested yesterday, it is the equivalent of petty crime and the cyber crime world. we are talking about a few million dollars in stock fraud. it is clear investigators want the hackers behind the attack and they have oinked to the hacking attack. there is a big question in the case about where the actual hackers and what role did the folks who were arrested play. stephanie: walk me through the image we have up right now. jordan: this is an image of josh and anthony two of the primary suspects in the case. in moscow, only a couple of weeks ago. it is an important image because

it shows these guys were traveling to russia a lot. anthony is accused of running a bitcoin money laundering scam. josh is accused of running a stock fraud scam. both of these have been linked by investigators to the attack through some technical means. that picture shows the extent of their activity there, we do not have visibility at the moment. but they were doing a lot of activities there. investigators believe they were also getting hacking training and hacking tools from russian cyber criminals. as i say, those individuals have been charged. -- not been charged with hacking. olivia: the instagram picture we're looking at lowe's like a bunch of from the kids on study abroad in saint petersburg. give us a sense. stephanie: they look like guys in brooklyn under the bridge.

olivia: whatever. the point is they look like your average 20-year-olds hanging out and not overlords. give us a sense of how sophisticated the attack was. jordan: that is the interesting thing about the case. by any stretch, the criminal masterminds that we would expect to encounter in a reached such as jpmorgan, the bank spent half $1 billion a year on security, like, it is one of the best protected banks in the world. stephanie: hold on a second pair one of the best protected banks in terms of the amount of money they spend the amount of people they staff, but is it actually fair to say it is one of the most protected banks? jordan: it is a fair point. they missed something in their network that allowed the hackers to get in. what they got names and e-mail

dresses, we're still not the crown jewel of the bank. if they wanted to take down the financial system, much more valuable data. they met in 2002 when they enrolled. these guys were kind of the average kyl to. they were fraternity brothers, i should nouriel minded. and somehow through the online marketing business they started they got hooked into the money laundering. stephanie: he said they did hack into the system, the crown jewels. is it that in order to get more secure information they would have had other capabilities, or they simply walked into the house to rob it and only made it to the foyer? jordan: the phrase we heard is that the hackers were so bad that they looked good. they got lucky. there was a server unprotected.

they got a lot of data, but they did not get credit card numbers or transfer information. an important hack, but these guys got lucky in this case. stephanie: really lucky. thank you for joining us. is it really sweaty in d.c. today? jordan: it was hotter the last few days. olivia: coming up next, a looming deadline for infrastructure. the lawmakers ridge differences and keep highway projects rolling along? the ceo of a construction firm will join us. ♪

stephanie: it is summer and more

americans are hitting the road. our highways are literally falling apart. now they're suddenly scrambling to keep federal dollars flowing into highway project for the july 31 deadline. chest rotations funding source has been gasoline, 18.4% -- 18.4 cents per gallon. a bill emerged from the senate but is under fire, not addressing overspending and it still has to get through the house. joining us now from the frontlines, mcdonald's ceo has a private underway in texas and illinois and elsewhere it he is in kansas city. great to have you here on market makers this morning. tell us what happens if the money stops flowing. very little going on right now, does it all go -- come to a halt? >> there are a lot of construction and engineering

projects already funded so it will not come to a halt. the bigger issue is the long-term play here in america where we have massively underfunded our bridge and transportation systems. unless we do something about it relatively soon, i think things could come to a halt. olivia: why does it seem the white house is not overly enthused by the plan that we will have a new construction bill? why wouldn't the white house -- a job creator, the country needs it, why wouldn't they? >> i think it is amazing to people like me in the industry that all of washington has felt so little need to make sure america passes bridges and i was systems are well-funded. if you look at america passes bridges, one out of every nine american bridges are structurally insufficient. about 200 cars pass over bridges every day in america that are structurally deficient. i cannot believe we're in a country today where washington takes so little regard to do its

job and make sure the projects are well-funded. stephanie: i am totally with you. you take a taxi from jfk back into manhattan to the roads you go on and the bridges you go over, they are in despicable shape. nothing is being done. i think a lot of the criticism comes from the fact a lot of people say the highway infrastructure fund is not actually the right way to do it. a lot of money in that fund goes to things like paying for public subway systems. d think the highway fund is the best way to fund new roads and construction? >> excellent question. the worst state is the district of columbia. you'd think there would be plenty of motivation to do something about this. the highway funding bill was funded by our gas tax, of course. that gas tax is in trouble long-term. that is a good thing that we are building more efficient cars if we want to reduce carbon

america. also as of ways infrastructure projects in the country have been financed well financed in the past. a great example is the national grid program in america where washington did its job. figured out what they needed to do, came up with a funding mechanism by which these programs are well-funded and move forward, and there are all sorts of examples of how this could be due in -- could be done right. there being done wrong. stephanie: i still don't understand why they would be done wrong or why wouldn't there be an incentive to do it right? it is still a missing link for me. >> it seems sad that washington becomes a political ploy and a pond in the system and amendments get added to the bills and there are too many

dollars being spent in other ways. he think of the roads and bridges in america even the new bill under consideration in the senate it would only guarantee about $50 billion annually in the system area so we have to look in the past like the clean air act here the national grid program, where funding mechanisms were created in washington, washington did it job, and this is an example of where democrats and republicans have to come together to figure this out. olivia: three years worth of funding in a six-year bill. is that a good enough compromise? >> no. a six-year bill is a great idea. highway programs are 3, 4, 5 your projects. they are programs that need darren t funding from the federal government or from private sources or really from wherever, to know which projects you want to move forward on and

in what way they need to have happen. it is a good step forward. at the house, they are still only with an emergency measures which will do nothing. stephanie: if you had one solution to make things work, a realistic one, we talk high in the sky in terms of what the government could do, realistically, what could the government to that would really create a vast improvement? >> i will give you a small one here and we spent about $12 billion per year in america on bridges. one in every nine bridges, like we were saying, is structurally deficient. to cure the problem, we only need to increase that to about $20 million per year. we have to figure out how to create may new taxes around vehicle mileage instead of gas.

or maybe washington needs to actually admit that they are not the right ones to be in charge here. stephanie: i was with you and i was saying yes, that could happen. but the suggestion that washington could possibly admit that they are not the ones equipped to do this sorry brother. it ain't going to happen. >> i am all in favor of washington admitting at some point, we need to do our job on this or that. i've realized is a lot to talk about an elected and about in washington. i cannot imagine a case where we come together and do the right way. stephanie: i agree with you, i love it, but let's get real. >> thanks for coming to kansas city. leslie will. thank you so much for joining us this morning. stephanie: still ahead, bond is

that for the 20 time and will have a sneak peek next and fun fact i asked my children if you could change her name to anything, what would it he and my second son said bond, james bond. that is pretty cool right there. ♪

stephanie: we are in the myths of earnings season and we are enjoying the best part of the show, the commercial break. back to real news. a ton of stocks on the move ahead of the bell this morning. our senior markets corresponded julie hyman is joining us now. julie, when you say integrated

let me tie something. i get pumped. short circuit, more than just an 80's movie. olivia: an excellent movie. stephanie: wally is an excellent movie. olivia: when we talk integrated circuits, we're talking semiconductors. they going to almost everything. linear technology, they did not go into quite as much less repair the company said its revenue will fall quarter over quarter by seven to 12%. it's a weakness in particular in its industrial unit, apparently an area that had not been -- not just linear, but computer markets, that has been something much more widespread. but you can see the shares are tumbling this morning.

also looking at a gene sequencing company, sales are missing analyst estimates for the first time since the third quarter of 2009. matt sent shares tumbling by 11%. we have been talking about apple all morning. then there is go procured what is curious about go pro is that it is not moving more. if you look at shares this morning, which i think we can, apparently we're having some computer trouble. stephanie: we have a plan to do the show wearing go pros. it would add a whole other element. olivia: here it is, only up .8%. the implied move ahead of time, 14%. we are seeing the small of a move, especially because the force destined forecast the estimates. a little curious. stephanie: that is why we need a

tutorial. thank you for breaking down key movers in the market. when we come back, we have got to talk to european financials. ♪

. .

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visit philipslifeline.com/caregiver today or call this number for your free brochure and ask about free activation. >> live from bloomberg headquarters in new york this is "market makers" with erik schatzker and stephanie ruhle. stephanie: good morning. you are watching the second hour of "market makers, and look who is here. olivia: i am olivia sterns. coming up tacos, oil -- what could be a better mix of story? investors might be up the on apple, but some analysts are not. shares up as much as 6%. gene munster of piper jaffray

called it an opportunity, sane investor should take advantage of the decline. iphone sales missed estimates and so did a revenue forecast. sales are selling off as a result. the country's biggest home-improvement chain is getting bigger. home depot has agreed to buy interline brands for $1.6 billion in cash. among the company owners, goldman sachs capital partners. stephanie: in greece, prime minister alexis tsipras will be in a familiar situation. this is not how greeks like to spend their summer. he will have to ask opposition mayors of parliament to vote for another austerity measure. his own party has rebelled against new tax hikes and pension cuts. those are the top headlines. olivia: apple has done it again

or have they -- the company posted a record third-quarter profit of $10.7 billion. if you think it is all from the apple watch -- i do not think anyone thinks that -- but think again, they are keeping a closed lip on what is being sold. tim higgins tim cook said the launch was as good as the launch for the actual i've had. do we have any idea on how many watches they actually sold? 10: they would not give a unit number -- tim: they would not give a unit number, but we can back out where the revenue came from and it could potentially be at least 2 million watches in

the quarter, maybe 2.5 million. stephanie: we talk about china being an opportunity for apple. if the chinese economy continues to slow down, will that have an impact, or is the opportunity so big, it does not matter? tim: revenue doubled in china. that is where a lot of the growth is occurring. they expected to become their largest market in the world, overtaking the u.s.. so, a slowdown would not be the best timing for apple. nevertheless, the company says they have full confidence in what is going on in the country. a macro environment is prime for continued growth going forward. the other argument going on for apple in china is the price points for the phone are appealing to folks who have more money to spend. olivia: we started a segment by asking you about the watch

because everyone is trying to figure out the next growth story for apple, but in the meantime they are an iphone company. they are getting 70% of their growth from the iphone. do you worry the company is too dependent on one product? tim: it is an apple store -- first, the mac then the ipod now the iphone. they will cannibalize every product until the next new one. the question is what will the new one the? as they hit these numbers analysts are saying what is the next thing coming down the road. for the interim, the next few years, it is clearly going to be the iphone. it was hoped the apple watch what level some of that, take the pressure off, but clearly it is not happening yet. some analysts think it will be another 18 months before we see

if the watch is taking off. stephanie: does the next iphone have to be a grand reveal with huge new upgrades and new apps within it? people are in the apple ecosystem, millions and millions, and they do not want out. because 70% upgrade, does it not seem a huge amount will upgrade simply because they are in the apple family? tim: there is a utility element to what apple is becoming as some analysts have talked about apple becoming an utility or an annuity company and that is why apple is spending so much time on services like apple music and apple pay. the concern is continued growth growth beyond apple enthusiasts. olivia: one thing that stuck out to me from the call is tim cook

said they are saying the highest android switcher rate they have seen, which sounds great, but i do not think i have ever heard tim cook acknowledge he was looking in the rearview mirror. stephanie: i feel like steve jobs would never, ever acknowledge another company, brief their name, utter a syllable that sounded like it. what do you make of it? tim: it is tim cook's company and the introduction of the watch and a large-screen iphones was his imprint on the company. the executive team is behind him, and he is plotting the future. olivia: you do not think he is worried for the first time ever? stephanie: with the record profit this year, you could sense some frustration that people were not more excited for what they are producing.

olivia: that would be fair. every other company in the world would be pleased with this. they are literally growing money on trees. stephanie: no, actually literally, they are not, olivia. olivia: thank you for keeping us honest. the grown up. stephanie: i love that i am the grown up. erik is homesick and he is hiding under the covers. coming up, a top fund manager says it is a good time to get into european stocks. among his favorites, european banks. we will give him the top names -- give you his top names to buy. you are watching "market makers." stick around. ♪

stephanie: welcome back to

market makers. i'm stephanie ruhle. former democratic senator christopher dodd says too big to fail is over. earlier today he spoke with the surveillance team and they asked what his biggest disappointment is with the implementation of his namesake law. mr. dodd: it has taken longer than we would have liked. institutions, if there is one thing they like, it is certainty, and when you have as long as it has taken to get into place, i think most would agree it is right to get it right, rather than click, so the frustration is tempered by the fact they are doing a good job, but if i could wish anything, i wish they would move along quickly. tom: you and your father represented the bankers of

greenwich four years. is jpmorgan your friend? mr. dodd: absolutely. a bank ceo said i would never think i would make this call to, but i have a better bank because of your law -- better capital, more liquid assets, lending is up 30%. we are now 64 months of generating jobs. this is working. it is not to say it is working. when you have a job of that magnitude, they will be a time when you go down the road and find there are things you overreact to war under reacted to. i have people on the so-called left to say we did not do enough. i've people on the right is say we went way too far. when you get those complaints, i

think you got it right. there is greater stability, greater transparency. the consumer protection bureau is doing a good job and too big to fail is over with as is the case with the stress test, the funeral plans, the resolution authority. time will tell isaac, whether or not corrections are needed. stephanie: that was former senate banking committee chairman christopher dodd. shocker, christopher dodd thinks the dodd frank act was a success. olivia: shocker -- barney frank is working for a bank. who saw that coming five years ago? much more to come. stephanie: working for sit it out. -- ben bernanke working for citadel. al new world. olivia: a whole new world. ♪

stephanie: a bank near and dear to me, where i started my career, credit suisse reports tomorrow, and that shot is up 17%. it's paris associate manager david herro -- it is his top pick. the fund is seeing a three-your return of 18.5%, outperforming 95% of its peers. david joins us from chicago. no one likes your call better than credit suisse employees who have been miserable, sucking lemons tortured for the last several years as other banks have rebounded and they have floundered. why do you think they have their groove back? this is the -- david: this is

the beauty of value investing. you have to be patient and identify what is quality at a low price. we think credit suisse fits that. they are a quality business, the private bank and the investment bank is selling at a low investment -- evaluation. new leadership will put a better focus on deploying capital where there is higher returns of the capital within the organization. when you combine all of the factors, we think credit suisse has a long way to go yet. stephanie: what was the problem before -- brady dugan? david: brady dugan did a very good job of navigating the bank through the financial crisis. this was one of the big investment banks acted not have a huge hole in the balance sheet. they learned their lesson from 2000, 2001. they shored up the balance sheet. the problem has been the capital levels, the leverage levels, the

rules from the swiss regulator cap changed, bringing upon uncertainty to credit squeeze and how much capital they need it or did not need. when you look at the core business, it is doing very well and you compare that to the evaluation. stephanie: do you think brady was unfairly judged because in the end he got bounced. david: i do not know if he got bounced. he was there for seven or a tough years. the bank had gone through any erratic environment, a global financial crisis. stephanie: isn't that my point -- he slugged it out through seven or eight years, had a hugely successful career at credit suisse before that, and what is his reward -- getting? -- pushed out. david: the assets that were not

earning returns -- if he had deployed some of that into the private bank -- he was doing that but perhaps could have been doing that quicker. stephanie: how, where -- turn off the spigots to the investment bank --what does that mean? david: what it means is both the investment bank in the private bank generate capital and free cash and once it is generating, you have to figure out where to deploy -- assets that have a high risk-waiting? if you do that, there is a capital tax on that, basically and you have to make sure you're getting high returns. i think the fear was that some of the lower returning businesses within the investment bank were getting capital where there was not a return we weren't there for them. olivia: we are talking specifically about credit suisse, but banks overall are

your biggest capital allocation, 60% of your portfolio. make the case -- i see you have big allington bnp, the french bank -- big holdings in e&p pair of the -- bnp paribas polygons and lloyds. david: people believe this greece defaulted the balance sheet would be hit hard. a lot has happened. all of the greek debt that was on some of the balance sheets has migrated to somewhere else -- basically the european central bank, the imf, etc.. really what you see is a fairly cleansed european financial system, but the market is not understand that. the market seems to think every time greece is in the headlines the first knee-jerk reaction is to hit european financials. olivia: you say that, but the euro stocks is up 50% year to

date, so maybe it is not the right time to buy in. david: if you look at valuations, the price to book value, the dividend yields which these companies are trading at they are extremely attractive, especially as we start to enter an economic cycle in europe. i hope this is a really good time to look at european financials given low valuations and where we are in the earning cycle. stephanie: where are you seeing the recovery? maybe the european banks are not completely susceptible to greece, so we do not have to worry about that, but away from greece, where is the great recovery that is then going to pay off for the banks? david: it is not going to be a great, huge, roaring recovery, but the european economy is projected to grow 1.5 percent, maybe 2% in the next year, year and a half.

when you have this growth, you get more credit expansion and lower loan losses, which means better earnings growth. the same time, these banks are focusing on costs. they're taking out branches going more to digital, etc., etc. you are starting to get in the front of what i would call a virtuous cycle for some of these european banks -- more credit expansion and less loan losses means better profits and earnings. stephanie: david, thanks so much. david herro is the cio for international equities at harris associates joining us from shy town. we have to take a break. when we return, more "market makers." we are about to ring the bell. stay with us. ♪

stephanie: look at your watches. we are just a few minutes from the opening bell here in the u.s.. you are watching "market makers." i am here with my partner olivia sterns and we have tracy

alloway, the bloomberg markets executive editor here with the three things moving markets this morning. tracy: number one, we had a milestone in markets in the second quarter. exchange-traded funds have surpassed hedge funds in total assets for the first time ever. we have a chart showing etf's barely edged out over hedge funds. this space to the trend of active versus passive investing. stephanie: while people pay two and 20 when they will not get the returns they used to get. olivia: and qe is not juicing the markets, so everyone says pay me, it is a stock-picker's environment. tracy: and maybe one stocks

rise, there is a comeback. who knows? this is happening at a sensitive time. carl icahn says he is worried about liquidity in fixed income and how etf's deal with that. stephanie: without a doubt. olivia: the other issue is passive investors, etf investors are more likely not to bang on the door of company management. stephanie: no, but people investing in etf's say this is my way to get high-yield exposure. we have not seen the market get tested. if you try to trade a high-yield bond, not something super liquid go fish. there is no liquidity in the market. people are flooding to etf's, but can they stand up if we are faced with a tough liquidity moment? tracy: something to watch out for. number 2 -- it has to be gold. the gold chart is getting uglier

and uglier. take a look at this. can we bring it up on the screen. gold is nearing its flash crash low and what is worse than that is the commodities index is starting to spread. it is at a 15-year low. zinc, copper, tin, all dropping. olivia: iron ore. gold is at a record low. tracy: it is getting ugly and the thing to look out for is the second and third order affects. everything is interrelated. people use metal as collateral for the trades, financing, loans. olivia: i would think at $1000 an ounce demand has to be more elastic to i feel i will one day -- elastic. i feel one day i will afford a cardiac love bracelet. stephanie: do people really buy

them for themselves? tracy: coming from a woman who has five. stephanie: moving on to number three. tracy: greece faces a decision on whether it will open the stock exchange. it has been closed for weeks. the question is if they can exempt investors from capital control. if they maintain some restrictions we can get another china-like situation where the market is open, but no one is really trading -- you cannot really trade -- is it a market in that case? olivia: i spoke to the economy minister in athens and said literally they will be here for months. stephanie: she used literally correct. tracy, thank you. you saw the bells. confetti in the air. let's take you to senior market

correspondent julie hyman for a look at what stocks are on the move at the open. not literally on the move because they are stocks. they do not actually have legs. olivia: they do not jog stephanie:. which ones are moving -- and jog. stephanie: which ones are moving in terms of price? julie: apple is down 6%. we expected them to fall with phone estimates below estimates -- phone earnings below estimates. this will be the stock driving thinks today because not only is it falling, it is pulling down other technology. the nasdaq is down 1%. apple will be part of that. not only do you have apple falling you have all of the apple suppliers that tend to fall when apple falls. i will give you an update in a

little bit on the last time we saw a decline like this for apple. also, when you talk about big cap text, microsoft not helping matters today either with a 3% decline. they posted a big loss, a $3.7 billion write-down related to know here, but that is not why the shares are down. we knew about that already. the company is already talking about weakness in the corporate business we know the pc business is weak, but microsoft, one of the core areas where they have seen strength has been the windows business -- that seems to be waning when it comes to corporate clients. the company is now offering versions of windows 10 for free trying to right the ship a little bit. one company higher on earnings today, or was higher on earnings today -- let's see if that is right. there we go, up 3% boeing.

the 787 dreamliner pacing record jet deliveries. the order backlog is stretching into the 2020's and earnings are eating estimates. it is not all negative, rbc, but in technology there is a lot of negative to go around. olivia: boeing's back order is worth five years of sales. it is not literally bananas, stephanie. stephanie: what olivia is trying to say is it is kind of crazy. thank you for the stock movers already. later today, we are bracing for a report from american express the first of the credit card companies including discover visa, and mastercard which we look at later this week, so i bring in bloomberg's elizabeth dekes time. talk about why this is a key quarter for the company -- no

more costco partnership, a whole new world. elizabeth: analysts are expecting this will not be a good quarter for american express and costs will be noisy. when the costco relationship and it is not going to just heard revenue. expenses are something analysts are really watching for and we will get a first glimpse of what could actually happen with expenses. the company has said they are planning to wrap up spending. they are investing in other products, including improving -- existing products to go after and keep costco shoppers. olivia: the chairman and ceo has been there for a long time, since 2001. the stock this year alone is down 15% year-to-date.

is anyone saying it is time for him to go? elizabeth: i have not heard that. we have seen some management changes. the president of american express, who was seen as a possible error apparent to take over at the gilligan unexpectedly passed away earlier this summer, so we have not seen a management shakeup. can is taking on more responsibility. he has more direct reports. stephanie: in terms of american express finding new participants to apply for cards, how are they doing with their peers -- when you think about the way younger the people want to spend their money, the relationship with credit -- what is american express doing because it seems a bit like yo mama's credit card. elizabeth: costco is tough.

other banks are giving american express a run for their money. there are choices for consumers. american express is investing a lot of resources in new technology, as are all the payment networks. they realize this is an important segment. they're are coming out with a lot of new products and spending a lot of resources. stephanie: all right elizabeth thank you so much for joining us this morning. that is bloomberg's own elizabeth dexheimer from washington, d.c.. olivia: i am signing off, this was fun. i am jealous of erik schatzker. i will see you in the park for the fitness challenge. stephanie: 5:00 p.m. -- if you are near central park bring your camera. turn it on, but guess what, i am not going anywhere. olivia: were bring your trunk --

truck to halt your on. stephanie: do you remember those -- i did not have a dvd player in my mom's car. that is all i had. i'll be back. we have more coming up. this young thing -- we are kicking her out of the building. ♪

olivia: -- stephanie: welcome back to >> first. bloomberg. -- "market makers. i am stephanie crude is on track for its -- stephanie ruhle. it is on track for its biggest slide of the year. $50 a barrel, james. would you make of it? james: i think we have had the

most negative news i have seen in the last month with the issues in china, the issues in greece, and the iran deal which has provided negative segment -- sentiment, but my sense is the fundamentals are tightening and getting better. u.s. production has flattened. international production is showing signs of flattening and rolling over and tightness and demand in the market is getting better in places like china. stephanie: bailey, the last month was all about -- really the last month was all about confidence -- this storm of news has affected things? james: i agree that it has been about confidence. with the greek issues, there has been some demand loss, but we do not think that is significant. the market is only about one billion barrels oversupplied. stephanie: we're hovering around

$50. december 31, where we going to be? james: $70 to $75. stephanie: will it be affected with a rate hike? james: the rate hike will probably be minimal and probably just one. stephanie: are there actions that could take place in the market, greece, china, that could cause volatility, get us off track? if we stay where we are going you say we will enjoy a way to $70, $75, but what are the elephant that could stop on it? james: one is iran, if they bring on more, that will be a negative. if china has more fundamental problems in their economy, that is a negative. we do not expect a hard landing, but if there is a hard landing that would be a negative. if degrees issue continues on and we do not see a resolution those are big. the big macro problems are the

same problems we have been watching. stephanie: you are you will see a pickup in volatility? james: volatility has been there. i hope it will not get worse than here. the fundamentals will start to take over from the big headline moves. stephanie: let's talk namespace we are bullish on oil, which means you would like to buy -- james: oilfield services -- halliburton is a clear favorite. we would buy baker hughes to buy halliburton-newco. halliburton is buying baker hughes. you get a 9% discount. also, we like schlumberger, the bellwether. land rovers and -- when and drillers and pressure pumpers. stephanie: one name to stay away from? james: offshore drillers in general. offshore was built for a much

bigger environment that we will not see for the next two or three years. copies like diamond offshore transocean. stephanie: james, thanks for joining us. when erik schatzker is not here, i only like to bring on optimist. james west. let's bring you back to our senior markets correspondent julie hyman to see what is on the move here in the first 30 minutes of trading, but we see a little bit of news on greece. julie: they are going to raid -- raise the ceiling by 900 million euros, the liquidity assistance which was raised a little less than a week ago by the same amount. this is essentially as greece has this agreed-upon bailout. we see the funding flow into it once again from the ecb. as for the other movers we are

watching, we have been talking about yahoo!, down 2.7%. the company forecasting sales below analyst estimates. marissa mayer still working on the turnaround at yahoo! and it does not seem to be bearing fruit as of yet. it is also not all about earnings. we have to mention a big deal we first talked yesterday -- st. jude medical agreed to buy a maker of implants that aid failing hearts. it is 40% higher than sore -- th oratec average so the premium is based on how the stock has been trading. it is up 9% today. finally, on the alzheimer's treatment front -- investors have been waiting for this day for months when a number of different drugmakers would present the results of studies

on alzheimer's treatment. biogenic failed to show a significant cognitive benefit so we see shares falling. eli lilly, even the results look more positive if they started the drug earlier in the disease progression, they did better on follow-up memory and thinking tests, but these chairs are falling as well care we will monitor the development on these results -- shares are falling as well. we will monitor the development on these results. stephanie: thanks. all you beach lovers might have a new vacation destination. how caribbean is planning to capitalize on cuba next. stick with us. you are watching "market makers" on bloomberg television. ♪

olivia: after more than --stephanie: after more than 50 years of estrangement, the u.s. and cuba reopened embassy's this

week restoring diplomatic ties between the nations and that could lead to thousands of new tourists visiting the island and one company looking to jump on that is cheapcaribbean.com. the ceo joins us now. you have your eyes set on cuba. clearly people are interested in going there. how realistic is it? what is the actual opportunity for you? steve: cuba is a huge market. if you look at 2014, they had 2 million visitors. it is a big market for europeans and canadians. for the u.s. market currently, you see mostly cuban-americans going down there, but one of our sister brands, apple vacations announced they will be offering tours starting in september and october, and it is something where evaluating as well. stephanie: from a regulatory

standpoint, how hard is this? when you think about not just the red tape, but what you need to go to -- that people who already use you, your clients trust you -- you have never spent time in cuba, you do not have relationships with hotels there. this is a risk for you. steve: i actually -- certainly there is a process you need to go through. you need to qualify for that people to people category, but it is a reasonable process and and adjusting market, terrific history, and a lot of demand because people want to get there before it gets fully commercialized. stephanie: let's talk about where the demand comes from -- not just for cuba, but your clients in general, baby boomers, millennial -- what does the word cheap attract who does it attract? steve: we have a broad base,

purchasers tend to be female most often and we look at the 25-55 age range. we do well with millennial's. bonnie is have the highest propensity to -- millennials have the highest propensity to want to purchase a product. stephanie: what does the word cheap do for you -- what does it mean to the purchaser? steve: we went through a re-banding exercise and if you look at the definition of cheap it is paying something that is less than its value. why cheap works for us is many people search for cheap caribbean vacations. at the same time, caribbean is in the name, and that indicates a specialization on beach

vacations and that is all we do. stephanie: you mentioned search -- google searches -- how much time, effort, money, do you have to devote to your placement in terms of search, your strategy around it? steve: absolutely -- it is a major channel for us. we think it works well. we are also getting into videos as well where we see a lot of engagement with customers that are interested in actually seeing where they might be going. stephanie: how hard is that -- whether it is google bing or whatever engine, do you have to work to negotiate, dare i say game the system, to get yourself good placement. i do not scroll to page two. steve: the way google works is it is a bid model, so we have to figure out what are the places we perform well and we can bid to those spots. stephanie: what are those places? steve: our brand,

chippedcaribbean does very well. stephanie: you did to the highest spot -- do you think that is the servants -- that is doing a disservice to consumers? when i google cheap caribbean vacation, i think my search engine is being honest, but is not necessarily being honest if you bought the best place in the search. steve: they offer the sponsored ads, and the organic results, and we focus on getting spots in both. google is clear about which spots are advertisements and through the natural search algorithm. stephanie: is the travel agent ever coming back? steve: ashley, travel agents have been coming back -- actually, travel agents have been coming back quite a bit. people enjoy the expertise and the convenience. that plays well to our model. when you look at our business

we specialize only in each vacations to the -- beach vacations to the caribbean and mexico. 40% of the visits come through our call center. average tenure is 2.5 years. these are highly specialized. bhd d is like a phd, but it is all about the beach. stephanie: there you go. i'm not going to let you go anywhere. you will play coanchor. in the last segment, picture this -- the best and most exciting images in the last 24 hours. check out this groom throwing it down. it is a groomsmen, actually. he and a bridesmaid danced into a wedding reception. i love the effort -- then he accidentally kicks her in the head. she falls down. he obviously did not realize this move -- again congratulations -- i love it on

every level. here we go. she is dancing. it looks at she is doing the running man. the back spring to the head. she was not injured. steve, are you a married man? steve: i am. stephanie: did you and your wife, out to any kind of performance like that? steve: i can honestly say i have never kicked my. stephanie: i am glad you did not. tiger dog has not kicked me in head, always time.

matt: breaking economic news -- the newest read on home sales and whether the market is improving along with the job picture. scarlet: apple posted biggest

third profit ever -- third-quarter profit ever. apple investors want to know what is next and they are punishing the stock this morning. matt: las vegas could be on the verge of winning its first major pro sports team. they apply for an nhl expansion franchise. matt: good morning. let's get straight to our breaking news -- june existing home sales are out and julie hyman has the numbers. julie: sales of previously owned homes are rising to an eight year high in june, five point 49 million on an annual basis. that is a