i am erik schatzker. if you take a look at the closest the apple shares are moving lower this morning. is there really something wrong with this company? apple, they can do no wrong. snack makerrning, amplify starting trading later this morning. you and here yet all morning long. the debates tomorrow. donald trump toss about his views on big business. point out one thing? i want to -- i want you to know where i was. the parking lot known as the turnpike. usually, i can spend as much time in the garden state as possible. being trapped on the turnpike

for north of 2.5 or three hours is enough to make you lose your mind. i am honored to be back. let's talk about time warner. reported earnings facing analyst in the secondts quarter. sales rose 8% over companies per $7re as revenues reached billion shares for time warner. point a full percentage for the s&p 500. seeing dollar signs. the billion exceed dollars. television ratings should benefit from the time zone. ahead.e hour

,he international monetary fund major benchmarks, and that significant work in analyzing decidingrequired when currency reserve status. the euro, the yen, and the pound . baskets of currencies. stephanie: republican voters will not start their nominee for six months. already split into front runners. primetime televised debate while night. that pushes rick perry and six other candidates into an earlier event. donald trouble be the front runner. front and center when the cameras come on. slamming his closest rival.

he waits in ways and you are not allowed to talk to the pack and then the monarch's the money is sitting there. he puts his best friend in charge in the may never talk. it is a joke. stephanie: donald trump brought back the famous line, you're fired. on the seven candidates who did not pull high enough to make it to primetime. berkshire hathaway always at primetime trading at a record high. later, there is a little less to celebrate. shares slumped this year and they're headed for the first annual decline since 2011. 2014,ires shares through more than double the s&p 500. for netflix do not have to worry about rushing back to work. offering a year

of paid parental leave. that sets netflix apart for most employers. google workers get up to 18 weeks. the caveat is you have got to watch netflix all day and all night. the five things you need to know this morning. today at the sec, here is what will be under debate. proposal that public companies will be forced to disclose how much ceos make in comparison with typical rank-and-file employees. expected at 10:00 a.m. eastern time. this is a matter of much debate here it is there a value showing this relationship, the total conversation relative to the average work? they will just show

this information. what is the downside? erik: there is a downside. what people clearly hope for, the folks that forced us into dodd-frank, is that it would shame the company, to be little more modest with ceo compensation. it becomes a game of one up and ship. is as wellour ceo paid as the other guy. i said guy generically. i want to argue more information is better. number two, -- back tot's go mcdonald's. that is not true. itber one mcdonald's said would not report same-store sales on a monthly basis and i

.aid that was terrible transparency is not necessarily better. i have to call you out on that one. i am sorry. he is right. the luxury department chain filing for an ipo. very interesting for this company. to retailer previously filed go public in june of 2013 before the owners sold it. the company was then bought by the canadian pension plan, now planning to get to the public markets. a $100 million placeholder. maybe open just in time for the markets. the store opening on the west side. erik: so many retailers are struggling, including the always reliable macy's. almost $600 per square

foot in annual sales compared to $500 for nordstrom. percent of sales. the ceo, karen. the online business is extraordinary. erik: let's take you to julie hyman in the newsroom for number three. julie: a really unusual report for disney. revenue rose year-over-year 5%. that is the first time in two revenue.erms of the company is also cutting its forecast for cable tv profit.

this is really unusual here to see disney fall by this magnitude after coming out with earnings. context is important. the stock was at a record yesterday p or 5% year to date. you have an environment where bob can do no wrong, except for this particular quarter. banks.e're moving on to posted its highest profit since 2007, second quarter net income in that beat analyst estimates. carly spoke at this lovely with the bank ceo and is standing by this morning. caroline also saves -- saved the cost-cutting plan. how come? story, of course, capital rules, that is affecting them.

that is what their competitors are doing as well. shares are doing -- going through the roof, 8.4% at the moment. they reached consensus earlier this morning. >> cost-saving plans can mean certain people have a change of jobs. jobs are changing. able to manage it in the smooth way by moving people around. confident we are able to adapt. in a very social and responsible matter. -- manner.

>> some people may have to change jobs. to adapt to the new business model. erik: a performance like this, which has faced challenges, is noteworthy. put what we have seen in context for the banking industry. >> equities trading, like many , they had very good performances of equities trading. fueled by the stimulus for the central bank. is main domestic market still very sluggish. even when they managed to have increasing revenue going down.

investors also looking at the capital. they have increased their 11% by the end of 2016. is what the banks have to do, increase their capital. that is what investors are liking this morning. thank you for giving us the latest and i will give you number five from california. shares of apple cannot get a break. flat. earlier this morning, the bank andits price target to 142 said the company will report significant slowdown in revenue growth as he iphone slowdown overwhelms the growth. i'm still not weeping for apple. they will be ok. we've got to move on. erik: yes, indeed.

friday, the labor department will be the jobs number. potential for a fed rate hike. more than $2.6 billion under management. good morning. tongueas been biting his at earlier comments. for what? ck: ceo compensation, i just think it means more people will want to be ceo. a lot of companies will try to narrow the gap and the point to how they are take care of employees better. costco is an example of that. you think it will have a healthy effect. jack: i do. i am in favor of it.

erik: the point worth making his previous attempts to shed more light on compensation appears to only to arm compensation consultants with theirnfo to demand clients, namely the ceo get paid more money. this is dollars relative to everything else in the company. i think it takes on a different characteristic at that point. there are great companies out there that actually pay their employees very well. and look at the success of the company. stephanie: i was a different time where when you were looking at those numbers, you are looking for a different reason. erik: all i'm saying is we the on basisrm perceptions of these data pure people inside board rooms, again, in

negotiations with consultants, come from different points of view. jack: this does feed the coming revolution. erik: let's talk about the u.s. economy at the very least. jobs number on friday. how important is it in your mind? very important. if it is a bad number, that pushes the fat out even further. a good number, which is where i i paid on a limb here, attention to this kind of thing. if you look at the adjusted number in july, it is negative. about a billion people lose their jobs in july. i have never met a seasonably adjusted person. but they have adjusted. , companies instance

are not laying people off. depending on what they do, this could make a big difference in the number. the number will be 250 or higher. we will get an important clue seconds from now because adp will report private payroll. 185,000 is what adp says was created in private sector jobs. she decline from the previous months of 237,000. what does that tell you? jack: that there is not necessarily a lot of hiring going on. the big that will act the july number is that there is not a lot of firing going on. we will see how the adp number translates into this number. is anything but a

perfect correlation to many months, gdp reported a decline. better.ey're getting relates to hires versus fires. if we are seeing fewer fires, that could end up with a big number and i bet the markets would react. also worth pointing out that in addition to the 185,000 private sector jobs created in the month of july, in the month of june, they revised the number down to 237. jack: 8000. right. how much impact do you think friday's number, how much number --, steve think that number will have on the rate hike in september and december? the language is basically said they want to raise rates. any kind of good member, a combination of what happens on the wage front versus a good seasonably adjusted number, i

think he keeps it closer to raising is in september. get pushed out to december. if not a good number, they keep saying their data driven. if it is a good number, the market will react quick. i suspect the fed will as well. erik: let's put this into context for an investor. with uncertainty surrounding a rate hike and the impact that will have on equities, do you want to be in public or private markets? jack: there is a big and growing illiquidity. because you are locked up and do not have instant liquidity, sometimes you can do things with the money because he will work it out. but the money needs to be there for a longer time to come.

the money will be locked up. a premium actually has to get paid. the premium is paid typically by the companies that need capital for a longer time. there is a higher return expected. premiume illiquidity conference to the investor. jack: if you are willing to lock your money up, you would get higher -- the fact that liquidity gives you some element tomorrow,d sell this therefore the return is less at risk, of course, everybody always sells at the wrong moment, but the money is locked up. the public in general it believes they need more liquidity than they actually do. they do not take a look at, what

are my needs over the next five years and how much cash do i to lock upo i need and keep the rest of the money free or not? have alreadyunds figure this out and they have a bigger segment of investment of what i would call private equity. stephanie: those investors went back to the hedge fund they were invested in and said, if you want to continue to manage my money, i need shorter lockups, monthly, weekly, daily liquidity. what they look at one universe and said, i want as much liquidity as we can, and at the same time for more into pe? jack: pe is not doing that. they're saying this money locked up. i will actually give you an element of liquidity. it is not daily liquidity. it is quarterly. why are hedge funds

being forced to offer so much liquidity and firms are not? jack: hedge funds are not doing everything that is related to what i call it a liquid strategies. if you are doing other things that require lockup -- there is absolutely not here no liquidity. fundu find a good hedge and they say they will give you liquidity, i would run for the hills. most of the good ones will not. if you are coming with us, that is it. also, do not panic and that is what is happening in these situations. you have liquidity and you panic. prices go down and you sell. how do you marry some measure of liquidity with a private equity type vehicle. to your point earlier, the

beauty of private and 80 is it is like the oven. you set it and forget it. you lock your money up for seven years and hope that you get your double-digit returns, 50% or more, to what you might get in the public arquette. how do you actually provide some element of liquidity there. you are getting distributions as you move along. there are liquidity events within the private equity sphere. those can be distributed. you can set up some vehicles, particularly when you have got one where capitals coming in overtime. a portionwho want out of what they're doing, but it is a small amount is not a liquid investment. you want that premium. erik: we have to go.

we are taking a short break and we'll be back. ♪

welcome back. time now for futures in focus. taking a look at oil this morning, it is holding gains as u.s. crude is it that's projected to decline to oil trading at the lowest price in a most five months after falling 21% in july on signs that a global supply flood is persisting. joining us bright and early in chicago this morning. the movement we have seen in seems to beand oil

taking a bit of a breather. is it a breather before down, or before more meaningful rebound? >> before another leg down. last two, over the this week's come on trade over the dollar, fed related, and trade based on demand which is china related. he see the stock market rebound nec crude oil rebound little bit. you see a feeling the fed will go in september or possibly move calmly see the dollar index spiked to that is what we have been trading off of. supplying that is still and demand concerns. we shifted from a supply concern we saw from july of last or two now, to a demand concern with the higher level of supply. supply start to correct in a more meaningful way? as oil in the u.s. producers are pulling back.

when the supply get tight enough that it is more easily -- easily matched with demand? fall has stabilized. he saw it fall i two on friday. natural gas fell by five or six. the holm x was down by two. in two of the last five weeks, you see predictions of supply here in the u.s. with major driller spirit you also see capacity increases. by 20 240 to announce euros per day. seeing --ot really saudi arabia announced they will , by about 200 or 3000 barrels per day. it is not widely deaf reported that they burn crude oil in

saudi arabia. that could offset saudi arabia as well. much higher levels than the market needed. >> you are bearish. how are you playing it? less i am afraid of a geopolitical event. that moved me into -- to be honest. in the crude oil market, swings have been very large as july last year. i'm a little scared of the unseen risk but i'm playing it from the bear side. 3825 is coming in the next month. thank you so much for joining us. erik: thank you let's have a look at some of the top headlines at this hour. stocks in greece are declining for a third straight day. the market is fit with its worst selloff in three decades.

greece's government says it hopes to work out a bailout in two weeks. sales of standard chartered arrive. bowing to boost the thanks's returns. is not meant to raise capital or the first half tracked by 44%. it cut its dividends in half, a revenue of $8.5 billion fell short of analyst estimate. wendy's posted second-quarter earnings that fell short of estimates could adjusted earnings per share missed analyst expectations by a penny. the company beat forecast revenue of $499. wendy's reaffirmed its full-year earnings forecast. shares are up 14% the start of and 27% in the last 12 months. delicious. is hot out there. promises to stop using

artificial colors and flavors in barsereals and snack within three years. thank you. the company is following an industry trend. consumers shy away from processed foods. those are your top headlines of the morning. get sugarym what you cereal? none of that. erik: trade alan's figures from june are out here let's go back to julie hyman to find out what they say. julie: we saw a deficit of 43.8 going dollars, an increase of 7.1%. deficit in trade three months. the forecast of the folks we surveyed, $43 billion even hear it much different than have been estimated.

you see the effect of the stronger dollar limiting exports . that has been a hurdle for economic growth. so many companies, not a shock here. down from 41.9 billion. it could mean the economy grew at a slightly faster pace in the second quarter than currently estimated. thank you very much. that is julie hyman with the latest. stephanie: apple shares this morning. will find out where everyone'favorite stock might open this morning. i would like to know what carl icahn thinks about this. ♪

stephanie: welcome back. lehman market filed for an ipo, listen to the views after it was sold for six billion dollars. leslie, why is lehman going public now? >> we have seen the best-performing sector, $8.8 billion so far this year. compelled going on a trend. they seem to have radically transformed their business. they're doing more things online and have done an acquisition that will help them penetrate the online world a bit more. first to go online and they are facing a lot of competition. seen asetitors are

having a big presence in the markets. could they be doing this because they think their success window is closing? >> that is possible, especially , a lot of people are concerned we are reaching a top. now is a good time to get them in. --tainly >> i just want to make sure everyone understands what that stands for. it is a good idea because that is what your job is. that.you love saying there has to be a reason to take it public this quickly. if they want to get an evaluation that is superior to that which they bought the company, $6 million, they will

have to sell at a premium to nordstrom's. if they have got trailing 12 month sales of $5.3 billion and nordstrom's trade at a multiple of 1.1, it does not even get you to $6 billion. it raises a question for me. now if you public will not get evaluation the market pays for. better than is peers. if you look at the actual perspective, they did something unique. they do not have underwriters. they filed without underwriters. week, i had never seen that before. stephanie: what does that mean? leslie: they do not have any banks they are paying right now to advise them. i think that is kind of interesting. it definitely shows the power the private equity firms have that they could get the banks --

they need why do that? this is an organization backed by tpg. if i am tpg or aries, wouldn't i say, the best bankers on wall , thoseare already higher left of the banks could not offer me anything i couldn't do for myself. why would i pay them millions of dollars to advise me when i'm with the skills? are they going to be getting what they are used to? stephanie: if it is a startup company that has never been in the capital markets before, sure, they need that it and handholding. clearly, it is not the first time at the rodeo. by what they say, d think you could bring your banker over to help me? they do not need it?

>> are they filing this way to reach out to potential inquirers, to potentially get acquired yet again? is it a dual track assess for the company? >> there you go. i want to acquire everything on the sixth floor, two blocks away from here and part of their parent company. thank you very much. still ahead, classified as the strongest tropical cycle of 2015 , headed straight for taiwan. more on that next. ♪

stephanie: coming up, bill cohen will join to react to president obama passes speech on the iran nuclear deal, which you can watch live right here on

bloomberg television at 11:00 a.m. eastern time. you aow about we give little analyst action with stocks about to be moving. let's bring in julie hyman to get a sense of all of the analysts are talking about today. in thedown very sharply premarket. i have a feeling analysts will have something to say about it. down 20% after reporting sales that missed analyst estimates. also a couple subpoenas from new york. by aiquidation was set off report about the company's lumber. selling particularly from china. ever since then, it has had to do damage control. still looking for a new ceo and that search is progressing today. beginning as the shares are down 20%. let's get to a big analyst call.

apple points were a sixth straight session of the client spirit we have not seen a street like that for years. the stock is being downgraded to a neutral over at banc of america and merrill lynch. a number of different reasons for buying the downgrade, talking about a significant slowdown in revenue growth as iphone sales start to slow down. you have these products ramping up. apple watch, apple music. they will take too much time to ramp up and make up for the slowdown in apple iphone sales. a big reason behind the downgrade. no more capital returns to shareholders beyond the already existing plan. also, share gains in china might be more difficult to come by. a host of different reasons behind the downgrade. take a look at my bloomberg

terminal for a year to date chart. this is the average we keep talking about yesterday. another day trading below this level. from the is down 14% record high where it was in february. as for iphone sales, here they are, the unit sales for the iphone. you tend to see them stronger for the last quarter of the year. huge growthl seen in the sales of the iphone. there is a broad expectation we -- slowerlowest growth. the latest expectation will not drive upgrades as past improvements on the iphone have. big kick up in a bells and whistles to go out and get one. a competing analyst will be with us at 9:15 to talk about this very issue.

our iphone sales really slowing and are they slowing that fast? if they are, how do you value apple? thank you, julie, with the latest on apple. stephanie: coming up, the gop debate has been announced. polls.ops the he knows entertainment. we will find out what mr. trump had to say. ♪

erik: we now know which candidates made the cut. stage, we talked with trump yesterday and asked his view of the fed. donald trump: i often talk with two hats for the last couple of

months, i have been a politician in your world. previous to that, i have been a business purchase -- person. i have always done very well with low interest rates. what isyou look at going on now, the problem is you are creating a bubble and the bubble could explode. i like paul a lot. i thought he was a terrific guy in so many different ways and me, heood holes and to was doing what had to be done. right now, we have the low rate again from the standpoint of what i do in terms of real estate. now, justpost office finishing up chart national in miami. from that standpoint, i like low interest rates. from a country standpoint, i am not sure it is a good thing. i really believe we are creating a bubble. honestly, if he is happy, i am happy.

he is a terrific guy. i think his policy, and his demeanor, there was something very solid about him. his demeanor was very good. something -- you tweeted that your rivals might be puppets. i want to ask you a policy question that undergrads all of that about citizens united. court think that supreme case was rightly or wrongly decided? donald trump: david is a terrific guy and i know he fights very hard heard from my damp point, i would personally rather not see it. i see all the money raised by and they are raising ultimately billions of dollars. from my personal standpoint because i do not need anybody's money and i want to do it field fashioned way and i do not like affect a lot of people are getting in, so personally, i

would not like it. it. not sure i like bush went -- raises $100 billion and then he waits and waits because you're not allowed to talk to the pack and i want to tell him, then the money sits deficit in there and he puts his best friend in charge and then they never talk, if anybody believes they never talk, it is a joke. now, someone who has spoken to donald trump many times, bloomberg contributing editor bill:. good morning. you just heard donald trump tell mark and john there that he does not need anybody's's money. he said it several times. i want to know whether you think that is true. it is not a question of how is $10 he is, whether it billion as he says, or $2.9 billion as our bloomberg index says. his money is not liquid.

brothers are going to spend the most $1 billion backing their candidate, probably not donald trump, how to see compete? >> i agree with you. who knows how much is liquid. last time i checked, something has given his campaign $1 million or $2 million. he is obviously getting huge amounts of free media attention. but you are right his assets are not liquid caret i do not know how much cash -- >> even if donald trump has a gazillion dollars, and i'm speaking technically, it does not mean he does not need to raise money. it is not like he is above it. he is happy to have an affiliation with a shopping mall in the middle of new jersey. surely, he might have a wallet full of money but it does not mean he does not take it out.

>> who would not? in the meantime, before he gets his organization whipped up, i'm not sure he has much of an organization at this point. still relying on people like his lawyer who got him into trouble last week with the daily beast. stephanie: hold on. right there. you just said his lawyer, michael cohen, who got him in trouble last week. can we categorize any of this as trouble? the way it seems to be affecting people in the polls, they are saying, this guy is keeping it real. they actually seem to love it. is telling it like it is. withe are fed up politicians being politically correct all the time. one thing you like about donald trump is he spieth his mind and does not care about the outcome. that is working at the moment.

i would not underestimate him. people are busy underestimating donald trump and hoping in the republican party that he goes away. stephanie: does donald trump not need the money because we are doing it for him for free? he is in the media. >> i sure this is beyond his wildest dreams. he loves free media attention even more and getting it tons now. does that mean he does not need clever political advisers to tell him not to step on his own words? he does need that. we all need that. it for a feween at months. erik: if he is truly serious about becoming president, what

does donald trump due to hold in the polls? >> i am not a political pundit but this straight talking approach appeals to people in much the way former mayor bloomberg did the same thing. not beholden to anybody. he spoke his mind and has great appeal. erik: do you think he will win? when the debate tomorrow? >> he is the reason people are tuning in, i will tell you that. thank you very much. stephanie: looks fantastic today. probably wearing a bathing suit under that we will be back in just a few. ♪

announcer: live from bloomberg headquarters in new york, this is "market makers." with erik schatzker and stephanie ruhle. stephanie: good morning. you're watching "market makers" on bloomberg television. i am erik schatzker. stephanie: i am stephanie ruhle. new york stock markets opening less than 30 minutes from now. how about the top stories of the morning? 00s. companies added 185,0 workers in the month of july. 30,000 less done overall economists estimated. the latest reading from the adp research institute. june was revised lower from

237,000 to 229,000. we will yet be july jobs report friday morning. looking for an increase with the jobless rate holding at 5.3%. president obama taking his case for the iran nuclear deal to the american people. president obama will make a detailed sales pitch for the plan in a speech at american university and washington, d.c. the address file private meetings yesterday with jewish leaders. they are afraid the deal could security.srael's the matter what the president says, it will not change the mind of israeli prime minister benjamin netanyahu. no one can make such a claim. how can you block what you do not know? iran can cheat on the deal. it gives iran a clear path to

the bomb. a difficult path to one or two bombs today and an easier path to bombs tomorrow. stephanie: the white house chose american university because john f. kennedy spoke their in 1963 to push an arms deal with the soviets. see the speech live at 11:20 a.m. eastern. stephanie: -- erik: months to go before republicans picked their presidential nominee. the first debate tonight is in cleveland. the top 10 from 17 declared candidates, donald trump leads. 7 other candidates are getting second-tier status in a predebate forum. among them, rick perry and carly fiorina. is it france or netflix? new parents working for netflix

will not have to worry about rushing to the office. the company offering as much as a year of paid parental leave. that sets netflix apart from u.s. employers. facebook gives four months of lead. google workers get 18 weeks. designate top stories. for media a big day earnings. time warner out with second-quarter earnings and others reporting after the belt. let's bring back julie hyman. first, disney down significantly off of yesterday's report. julie: this is the first time in two years the company revenue missed estimates. as analystss good anticipated. down as much as nearly 8% in early trading. disney cut its forecast based on the outlook for its cable network.

slowing subscriber growth at espn. subscribers.ion in we are seeing the currency effect so many companies have fallen prey to this burning season and last season as well. time warner, second-quarter earnings beat estimates driven by cable networks and its movie studio. $1.25 a share. for context, we've seen time warner up 2.9% this year, disney has gained 29%. got 21st century fox and cbs reporting numbers after the close of trading. we will look for comments on buybacks from 21st century fox. as always, a look at ad sales. time warner sales, pulling back by 3% in premarket. erik: neiman marcus is going

public. we've been talking about why. now might be a good time for an ipo. let's look at how this retailer stacks up against competitors goodman,, bergdorf maybe nordstrom. let's ask milton. this is your business. new study luxury retailers. how does it stack up? milton: bergdorf goodman -- stephanie: same company -- milton: has been the number one multichannel retailer. neiman has been number three, close to barney's. they mix up the product very nicely. stephanie: specifically why? one would argue the luxury experience, the brick and mortar experience is what luxury shoppers want. bergdorf goodman has one of the

highest real estate in new york city. a luxury museum. why would they do so well online? milton: they redesigned, they put the product out there. they are doing marketing. they are attracting wealthy millenials. milton: does it have to do with the fact that online can attract international shoppers? walk through, there are international shoppers who you would not normally see. milton: the wealthy are pretty resilient to an economic shots across the world. the u.s. wealthy consumer, and boomer, millenial, love bergdorf goodman. an excellent experience. there's a guy in the shoe business doing a tremendous job. he's the ceo. their client experience matches

the product offering, not true for other competitors. erik: investors are going to have to make the same choice that consumers do. which do i want to own? what are you getting in the way of strategy? in the way of differentiation from neiman marcus you are not getting at nordstrom, for example, which is publicly traded. stephanie: hold on. is neiman a fair comp? erik: it is the only comp. macy's is more diversified. milton: the same wealthy consumers chop at nordstrom. devalue and quality of any meant -- the value and quality of a neiman marcus product, what karen katz and her team has done, they have modernized neiman marcus. their people to

be relationship builders instead of transact errors -- t ransactors. why was tiffany such a good company? stephanie: the experience. they create the experience. if you are going to go to bloomingdale's and look at the same product at bloomingdale's or bergdorf goodman, they are priced at the same level. bergdorf's does offer a different experience. when you say millenials like it, anti-ole offering seems millenial. milton: there's a myth that millenials are not people, too. they are only digital. i've lectured at harvard and columbia and asked how does luxury fit into your life? absolutely. what karen katz has done is educated her sales associates. loses seven brand

out of 10 consumers every year, a 30% retention rate. if you can move that needle, you can improve the top line and bottom-line. executing the fundamentals. one example would be outrage after the client makes the purchase. attribute anyyou of this to the fact that karen katz does not come from the outside? she was born and bred neiman. ceo andshe's a woman she understands how collaboration, cooperation and experience works. stephanie: e-cig -- erik: the ceo of the luxury institute. stephanie: mindy has from professional who manages $200 million. he is still in his 20's. what he is planning next.

stephanie: welcome back to "market makers." some people take life by the horns. our next guest played tennis

competitively. research, ated sdb hedge fund with $200 million under management. he is not even 26 years old. started playing with numbers in his dorm room. sam barnett, welcome. he started investing in college? sam: when i was a little kid. i did and investing contest when i was 10 years old. stephanie: is in the markets are math? sam: i've always been interested in data. my current project is developing a hedge fund and working on the business. i am trying to understand data from different perspectives. stephanie: the hedge fund is part-time? sam: the hedge fund is my part-time job. my main research project to pursue my phd is a neuroscience

project. stephanie: hang on. erik: the hedge fund is full-time and phd is part-time? sam: everything is full-time. i am supported by a great team of researchers that help develop this perspective. stephanie: you raised $200 million. where did you raise it from? sam: it happened over time. stephanie: he's not even 26. sam: my dorm room days, i was managing $2 million. erik: at caltech? sam: right. more people believed in our philosophy of using data-driven insights to protect the markets. usingeads our projects, the brain to predict what people are doing. my team is a fascinating group of different interdisciplinary researchers -- stephanie: how many people work

for you? sam: over 20 people. stephanie:. they are your full-time employees sam: great. we have a team of six interns. erik: what kinds of investors? stephanie: there you go. sam: you got my facebook page. erik: when you walk in a room filled with investment professionals at institution or endowment, they are like hang on, this kid is not even 26 years old. who have you been able to persuade? stephanie: where did you get the original $2 million? sam: it is not that investors are trusting me with my intuition. they are trusting our philosophy of a disciplined and quantitative approach. a number ofether is different backgrounds, economists and chemical engineers -- stephanie: anybody who wants to raise money is going to say that. you walk in, what specifically

are you investing in? what track record? who has given you money? sam: our first investors were introduced to me by a professor at caltech. i've grown that through a network of people, each investor has been receptive to our message. we have a really good investor base that wants to invest with a conservative and quantitative focus. one that is not high-frequency. so many funds are focused on short-term trends. we are using data-driven insights to make long-term or medium-term productions. stephanie: ura quantify -- you're a quant fund? erik: some unconventional signals you look for. sam: we have a number of different things you look for to make our picture of the market. this is a product of an interdisciplinary team. we look at headline economic

indicators. other small facts that might be related. adoptions.loans, pet stephanie: pet adoptions? erik: raisins are supposed to come up. sam: the number of pets available for adoption is negatively correlated with the economy. if there are more pets available, that is an indicator that consumers are weaker. that is sometimes a leading indicator before you hear about consumer sentiment. that is one example of -- stephanie: people who have extra money it will say yes, we can get a dog. sam: exactly. there are people who give up their pets if they cannot afford them. these are really good pulses for building a big picture. all these different factors. you mentioned auto loans. auto loans are a better indicator sometimes than waiting

for mortgage data. repossession of car loans is a about 50 days. repossession of a home could take 300 days. weakness. signs of if you had been monitoring either of these markets -- pet adoption population or the auto loans -- you could have predicted 2008. stephanie: what would have made you thought pet adoptions? i love it. right on. how did you think of that? sam: that is part of the team. thinking about new ways to predict things about the world and understand data. erik: before we go, among the world of investment luminaries, who do you admire? sam: i like the way jim simon runs his business. he has a different approach to investing. he's a high-frequency investor. in terms of building a team of the smartest people, that is what i'm trying to emulate. stephanie: they are yelling at us to be done. one piece of data that is most important to track, what is it?

sam: consumer sentiment. that is the most important factor i think about. we are trying to measure other ways to think about that. stephanie: the number one way you measure that? sam: it is an aggregate, you cannot rely on one factor. that is what our team is based on. stephanie: there is no eureka. if there was, why would he tell us? so cool. sam barnett. erik: when we come back, apple has been taking a pummeling. ♪

erik: some top stories. online travel agency priceline delivers earnings that topped estimates, driven by higher bookings. total travel bookings rose 11%.

priceline sites include booking.com and kayak. the company has purchased others to fend off competition from google and expedia. estimates withts a results driven by cable networks and its movie studio p sales rose 8%. $1.25,s per share of $.22 better than average estimates. shares up 2.5% this year. shares of berkshire hathaway traded at record highs at the beginning of warren buffett's 50th year at the helm. ers, heading for the first annual decline since 2011. visit your top stories. we will be back after this short break. ♪

stephanie: welcome back. you are watching bloomberg. this is "market makers." i am stephanie ruhle with erik schatzker. a few minutes away from the opening bell.

the three things you need to be looking at this morning. also joining us, the ceo of 5th street asset management. kick us off. tracy: i would feel remiss if we did not talk about the fed this week. we had a wall street journal interview with dennis lockhart yesterday saying he thinks the fed, if it waits too long, that poses risks to the financial system. three voting members of the fomc you have expressed desire to raise rates in september. think? the markets the two year treasury yield is about to reach multiyear highs. it needs to go a tiny bit higher. then it will be the highest since 2011. the market starting to price in a september rate hike. erik: we had a flattened yield curve. the 10 year has dropped.

what does that tell you? >> janet yellen is committed to doing this. you've seen fed governors talking about it with permission of the head person. rates are going to go up slowly. good for some markets -- for some markets here and are going to go up this year. erik: deliver a number two. : tracy worst-performing currency in asia is the ringgit. a 17-year low. the interesting thing here is the ringgit is falling even though there was a job in malaysian exports. stephanie: this is an interesting chart. why should we care? tracy: because -- stephanie: would you have known what the currency was? erik: it might have taken me a few minutes. len: erik would have won.

tracy: markets do not operate in isolation. when people are talking about the rising dollar and rising interest rates, you have to think about the second order effects and emerging markets. nothing exists in an isolated bubble. len: you cannot look at the japanese currency which has declined quite a bit. and so, i think a lot of the asian currencies are in decline. maybe this is one example. tracy: an extreme example. erik: can we tie any weakness to the scandal beginning to develop there? tracy: malaysia is facing a political scandal. it has the commodities industry which is affected by the collapse in commodities complex. emre seem to be a lot of currencies suffering from political scandal and the commodities fallout. the other being brazil.

erik: let's touch: on number three. tracy: we know investors in china borrowed money to buy stocks. did you know they are borrowing money to buy bonds? a carry trade going on in china -- stephanie: one more time. tracy: borrowing money to buy bonds. len: a lot of money. tracy: they like bonds. there was a rally in chinese bonds. you need to borrow to amplify returns on those bonds. they are doing it in the interbank market, repo market, one big carry trade. len: a monstrous carry trade. when i went to china and i was on bloomberg asia, we visited some of the cities that are empty. the way they pay for the buildings, they cannot afford the currency. they give you two apartments to the cement guy. payment in kind.

the exaggerations going on in this market are scary. what happens when this unravels? i think this is the story. buildup of leverage in the chinese bond market scarier than what we saw in the chinese stock market? len: the scarier thing is they had to make a fund to buy their own stocks. that has never worked very well. when a country has to do something like that. erik: the u.s. and now europe created a fund to buy its own bonds. it worked, sort of. len: it was a little different. buying your own bonds and giving infinite leisure -- infinite leverage on treasuries is a little different. what they did with greece, cutting them out of that system, put them in their own world. stephanie: one more time. len: what they did with the qe

system in europe, you have infinite leverage on sovereign debt, not greece's debt. if greece was cut, it would not topple the applecart. germany has been prepared for that. tracy: the original ltro's included greek debt. banks bought a lot of greek bonds using ecb money. that did not end well. try to unravelo that over the last couple years and separate out greece so if they were to punt out of the eu, it would not topple the system. erik: we will continue in a second. thank you for the three things. finding out what is happening in the stock market. tracy: great energy. coffee. stephanie: positivity. >> --

erik: i want to take a break to find out what is happening with apple. breaking aks higher, three-day losing streak. apple is not geared sixth day of declines. february 2013.ce there has not been a catalyst for the selloff. a downgrade of the stock from bank of america-merrill lynch. analysts saying they think there will be a revenue slowdown at apple sparked by slowing iphone sales. the new products there will not make up for slowing growth in the iphone. shares down another 2%. deeper into a correction for apple. media earnings, disney coming out after the close yesterday. plunging 9%. seell have to go back and the last time we saw the stock fall like this after an earnings

report. sales missing the average estimate for the first time in a couple years. espn slowing. one issue. the company said its parks and resorts revenue suffered a little from higher expenses in paris and lower attendance at its hong kong park. basedarner beat estimates on the strength of its cable networks, movie studios. i was e-mailing with paul sweeney. he said even though the company not for the quarter, it did raise its full-year forecast. raising concerns about the second half. lumber liquidators plunging, down 15% after the company's sales trail estimates. sales fell nearly 6%, a bigger drop than estimated. ongoing issues concerning chemicals used in flooring sparked by a "60 minutes" investigation. the company has gotten two subpoenas from the new york office of the sec. for the update.

our senior markets corresponded. back to len of said street asset management. fifthback to len of street asset management. we did not touch on some things you are able to -- you are eager to discuss. including liquid alts. len: we manage middle-market loans and broadly syndicated loans. you find these in what we call liquid alt products. they are not necessarily liquid. stephanie: i love this. len: that is a real problem. i trade in this market. stephanie: who are they telling -- who is it specifically that, who are they telling this to? len: they call the product

liquid alts. stephanie: how is liquid to find? -- defined? len: that's the point. it is defined differently depending on the product. shown to me by a hedge fund manager yesterday. i normally do not bring my phone. here's the phone if i put it down. it is not moving. no volatility. what creates volatility. i am stealing the idea from andrew, who runs a $650 million credit fund. i create volatility, an exogenous force. the loan market has no volatility because the street has no depth, the street is pulled out of our market. 94, does not move. people are assuming it has no

volatility. what happens when you have a liquid alt fund that has to sell? all of a sudden this is 82, 96. saying,e: what you are they are calling this liquid because it is not locked up. in theory, you should be able to sell this. in practice, even though it is not locked, you cannot sell it anywhere near the quoted market. len: perfectly said. erik: what about energy? len: energy, i was really negative on energy and the high-yield market in april. erik: last time we talked. len: i was a little early. what is happening, the revolvers were coming due on a lot of energy companies. i thought the companies would default. fully appreciate, there were a lot of hedges in place by the energy companies on oil prices that allow them to survive. , the hedges are

starting to roll off. maybe this is the catalyst -- erik: they are going to hit a refinancing while. len: 25% of the refinancing market is in energy. the good ones have already tried to finance, a big problem. erik: how do you position yourself? energy have less than 1% exposure. do not bottom fish and energy. stephanie: hold on. fund managers who invested heavily in energy in the high-yield and distressed markets in the spring. i'm not saying franklin templeton. when they go to sell, they see the market, we should not be shocked to see 80 million bonds clear at 20 or 19. len: we had a small energy exposure, it went down 10 points

in a day. stephanie: that is not necessarily foul play. not acting as a fiduciary. welcome to the deep end. len: trying to make the middle of a quote that is stale. schmote.: quote erik: sitting right here is an -- dan ive of fbr. stephanie: good luck today. erik: you are here to talk about apple. as we have seen, apple stock has been taking a beating. you have a $175 price target, you have brought it down. what gives you confidence that apple can deliver? a lot of people are losing the confidence. dan: it is a white knuckle period. the iphone number that was strong but did not beat expectations. i view period this as a

three-month battleground -- i view this as a three-month battleground period fall, ithe 6s in the believe this is going to be a massive opportunity to own apple. you are going to see a lot of peers yelling fire in a crowded theater. cash for a company the street is underestimating growth in the next year and a half by 15% or 20%. erik: you follow this stuff. how much of this matters to you? dan: apple is a premier credit. they borrow so cheaply. what really resonated with me, i week, thisr last

guy is brilliant. it relates a little too apple. the ceo is, is he as innovative as the former ceo, can apple manage the innovation? i've come to respect a great ceos. dan: he's proven it with the iphone 6. now it is about the iphone 6s, streaming tv, the apple watch has come out softer than expected, a headwind. erik: do you think apple, this period, the white knuckle ride whating to mirror investors went through in 2013? the stock started the year at below 60 and was back to 80 by the end of the year?

on a split-adjusted basis, it is at $114. dan: a similar trend. from accelerated buybacks, using some of the $200 billion more. a've seen in the past when stock has a freefall they have been able to take advantage. even coming here, the cab driver was talking negative about apple. like you said, it is a consumer, it is a retail name. this is the golden standard for technology. correction as a rather than the start of -- i find it embarrassing when someone compares the nokia. len: do you think they should have returned a bunch of capital? stephanie: len has fallen right into the tv anchor mode. it was proposed in a letter to apple that they recap

it. they could get better roe's for shareholders. dan: the $200 billion was a starter. they face questions. as much as china has fueled apple, it really does become do they do and etc. rated by back? -- an accelerated buyback? erik: why are tech companies afraid of capital efficiency? dan: a lot of their cash is offshore and they have not paid taxes. as that read patriotss - -- as our governments, has to fix, that's another topic. apple is probably in one of those quagmires. dan: right now, they are going through a period trying to

figure out what the next step is. the next few weeks of the accelerated by -- buyback could kick in. you're going to see the end of the apple story -- this is a thi rd inning. stephanie: apple makes money hand over fist we talk about companies that make absolutely no dough. erik: we have to leave it there. dan ives, managing director of fbr capital markets. stephanie: i amhe heading on vacation, len is probably going to be taking my seat. 1 wall st bank is turning to gaming to build mobile prowess. that story next. ♪

stephanie: welcome back to "market makers." you are watching bloomberg. our top stories. the 2016 summer olympics are coming to rio de janeiro next august. comcast, nbc universal is expecting record advertising sales. expects sales to exceed $1 billion with commitment from sponsors including nike, kellogg and coca-cola. on pays to top the london games. tv ratings should benefit from rio's time zone, one hour ahead of the eastern u.s. kellogg says it will stop using artificial colors and flavors within three years. the company's move follows an industry trend. breakfast cereal sales slumping as consumers shy away from processed foods. how are you going to get the green in the lucky charms?

a new sign of openness to roman catholics who have divorced and remarried. pope francis says the church still has a place for them. the pontiff says they have not been excommunicated. his remarks point to a possible change in the church's stand on remarried, divorced people. they are currently banned from receiving communion. those are your top headlines. i loved every one of those. erik: all right. sec minutes from now, the is going to sit down and debate a rule that has been in the works for some time. part of the dodd frank act. americanwould require public companies to disclose the ratio of how much their ceos get paid relative to everybody else at the company. david is here to talk about it.

let's remind everybody, i tried to summarize it, what is on the table? block.an 800 plus page 800-plus page law. the rule would take the sea ceo's rule would take the topensation and compare that part-time, full-time, people working abroad. erik: it means a lot to companies. david: you look at while you might have this rule. a lot of people were angry at how much people heading these companies make. if you look at that ratio -- stephanie: life is expensive in

colorado. david: you look at how the ratio has changed in the last 30 years. 46-1,n ceo and worker, now 341-1. the afl-cio, the union that has gotten almost 300,000 letters sent to the sec. that is why this has taken so long. erik: what ultimately does congress hope to achieve? it is congress that passed dodd-frank and the sec charged with executing the order. david: the sec went about this kind of begrudgingly. if you talk about people in favor of this, they will say it is more transparency, more information. shareholders can vote on compensation packages. another tool. have opponents who say this is a meaningless statistic. be meeting -- it can be so diluted.

the problem that they have let this become so long and convoluted? i remember they had something like 80 different proposals for how to define what market making was. had they made this rule too complicated? it is never going to be executed to the way it was originally intended. david: we will have to see. i was talking to a lawyer yesterday talking about the complexity of this median. if you have somebody working in shanghai, the way his compensation is calculated will be different. he's not going to be using a w-2. it is hard to compare apples to apples. he's heard of companies figuring out how to do this. a big question is if the rule goes through, is it going to be for the 2016 proxy or 2017? if it has to be 2017 proxy filing, all hell might break loose. erik: in theory, we should hear

from the sec today. david: it is the third item on their agenda. the meeting kicks off at 10:00. the expectation is they are going to vote on it today. erik: i know you will be following it. thank you. in order to better its mobile banking experience, 1 wall st firm is looking to an unlikely source. industry.ame wells fargo bought a stake in a company that uses behavior protecting technology to retain mobile gamers. ideaes not seem like a bad after wells ranked sixth in a 2014 survey of mobile features. the author of the story for bloomberg news joins us now. >> wells fargo has taken a small stake in this company that collects data from the sensors in your phone, gps, accelerometer. it tells how fast your phone is

moving and how much it tilts. erik: that is why you can use your phone for driving games. yannis dragasakis -- dakin: they are hoping to figure out how to use that data to make a better mobile banking app. erik: what do they hope to find? they are -- they are trying to tap into a trend. in five or 10 years, the data will be a bigger part of aps. wells fargo is trying to get ahead and figure out what the data can do to help them make a better app. and keep people on the app. get people to go to the app more often. erik: there is no need for people to do more at the bank. if you need money, go to the atm. maybe you will withdraw a digitally. let's forget about that. is this about stickiness? people feel

more attached to wells fargo? dakin: it is. erik: it is cheaper to operate if more people use the app. dakin: as people move away from branches or going into the branches as often as they used waysanks are looking for to keep customers. one way it was explained to me, the etiquette of mobile phones is becoming more important. you get alerts at random times. sometimes they annoy you or you are like why am i getting this now. that factors into your idea of brand. erik: this company understands me. dakin: exactly. if you get an alert, wells fargo wants you to check in. you happen to be at a place where you can -- stephanie: we are moving closer and closer to the movie "her." that app gets me.

erik: which bank does technology best? dakin: usaa. stephanie: what? erik: it manages money for veterans. dakin: they have no branches. they have been doing digital for a long time. bell onakin camp videogame technology to improve the banking experience. stephanie: see you tomorrow. "market makers" is finished. erik: i will be here after the break. ♪

olivia: good morning. 10:00 a.m. in new york city. 3:00 p.m. in london. erik: you are watching bloomberg "markets day." olivia: revenues fell short of estimates.

cord cutting is eating into cable. erik: wall street bets on your workout. planet fitness is going public. the company could be worth more than 1.6 billion dollars. olivia: a crackdown on corruption hitting luxury spending. we talked to the executive in charge of some of the best champagne and cognac brands in the world. good morning. i am olivia sterns. erik: i am erik schatzker. breaking news. just released nonmanufacturing index. julie hyman is in the newsroom. julie: disappointing manufacturing data lately. service is doing well, 60.3 was the reading in july. higher than the