." i olivia sterns. corey: i am cory johnson. we are in all week. oil -- olivia: oil on the move, hovering just above $40 a barrel. we're going to ask john hofmeister where he sees the bottom and the real impact it will have on the industries. corey: also, winding down. not too late. a great piece of sun valley real estate and ice in the weather. lehman brothers put his pad up for auction. could be yours for the low price of $20 million. olivia: i heard you had to put down a 500,000 deposit. corey: but it is sun valley. olivia: i love sun valley. time for our top stories. along the korean border, the most serious exchange for artillery fire in five years.

that prompted south korea to release an artillery garage. no word of casualties. earlier this -- month, to korean soldiers were wounded by landmines. hasant pharmaceuticals spotd to buy pharmaceuticals. they will pay $1 billion force brought pharmaceuticals and extra spot reaches a certain milestone. spot will start selling the female libido drug in october. corey: hillary clinton might not have used a private server for e-mails when she was secretary of state. the director implied that yesterday. is she did have her own e-mail account, it was just more convenient and she kept it like that and that is the thing, she did not really think it through and she had said, had she come she would have done it differently.

corey: the fbi has clinton's private server. the issue with the e-mails and whether classified materials mishandled, benton said she did not read classified e-mails from her private system. former president jimmy carter both hold a press conference to talk about his cancer treatment. last week, ex-president carter said a liver surgery discovered liver can't -- cancer and other parts of his body. the press conference will be here live at 10:00 in the morning on the east coast and 7:00 a.m. on the west coast. overfl got tough questions the four-game suspension of tom brady. in new yorkcourt sounded skeptical that brady took part in this game to deflate footballs. brady and roger goodell have been told to appear in court on august 31. those are your top headlines. olivia: let's get you started with the five things you need to know about this morning. starting with number one, u.s.

stock futures are sliding in the red ahead of the open, and equating equities will extend losses for third straight day. her are concerns over china's impact on emerging impacts -- markets and global growth as china's central bank injected $23 billion in open market operations to help prop up the you and -- u.n. of concern across commodity producing nations and you are seeing that where commodity producing country currencies. corey: i thought the conference call yesterday had telling things -- the glencore that sells coal, oil -- olivia: also the largest commodity trader. corey: even that company cannot get a read on what is going on in china and that suggest the slowdown is more extreme. olivia: if anybody had visibility, you would think they might. the number two story, what is happening on the oil markets. let's get out to julie hyman

with number two. julie: china is a part of the story with the emerging markets. also part of the story, the unexpected increase in u.s. crude stockpiles. we learned about that yesterday. we saw those stock piles of the most since april, so that wayne on oil and continuing to weigh on oil as we get into this morning. we had crude closing at the lowest in six years and obviously extending those declines as we get in today. citigroup out with a note saying crude could fall as low as $32 a barrel, a price we have not seen since the financial crisis. oil, for perspective, pete this year back on june 10. since then, it has fallen by about 34%. at least if you're looking at wti. this slump really deepening as a have that china devaluation and now the devaluation of other currencies. olivia: that really is a huge move. crude has fallen by one third.

corey: i was looking at historic selloffs for the last few decades and oil goes fast indeed. olivia: apparently. three -- number three, tech earnings parried to really interesting, really controversial companies, salesforce and hewlett-packard recording after the bell, i guarantee both will be interesting. hewlett-packard i think probably is down off of the 52 week low which would make it a new 52-week low. olivia: why is this interesting? corey: totally different stories. hewlett-packard is a disaster. they have been having so many problems and they are restructuring. one-time restructuring charges for more than one decade. olivia: because they have printers and desktops and nobody buys those anymore. mean: no, that would declining sales. restructuring means that whatever they are doing at the corporate level is so tumultuous that they are taking special charges, laying people off,

changing their business. now they're completely remaking the business for the second time the last 15 years. the last time they made a remake of the business was a merger and now they will split it up into different businesses. we have open questions -- how much more restructuring will be necessary? how many more layoffs? how much more can they extend the layoffs? it has been a disaster. on the other hand, salesforce, one of the top line growth stories and general profit stories, seemed dramatically declining growth. this was growing at 38%, 37%, 35% -- olivia: is that what you are looking for? corey: probably 20% year over year, so that slowing growth could be a great concern. bookings are growing solar -- growing more slowly than revenue. olivia: number four is interesting for me. valeant buying spot pharmaceuticals for $1 billion. we had not heard of this company monday but on tuesday, the fda

first drug tot treat female desire disorder. will be available by the end of the year. valeant has mike pearson over that the ceo, i believe he has spot sale x, -- this is interesting because it brings valeant more into the women's health story. corey: it has been widely criticized for having lots of side effects, fainting -- a shady safety, profile. corey: it was turned down twice by the fda and they try to drum up support for the drug. arguing that there are 40 drugs fda approved drugs that treat male sexual dysfunction and none for women. it seemed to work with that the problems are still there. olivia: of course. i'm cringing at the thought of commercials.

the cialis commercials are bad enough. corey: the viagra one was great with the fiat -- it was great. olivia: that was a fiat commercial. corey: it was both. like a viagraks commercial but i don't think viagra had anything to do with the fiat commercial. corey: i'm just saying. maybe the drugmakers should taken out. olivia: they should. number five? corey: weather channel. universal.and nbc the company for $3.5 billion in 2008. the cable channel is considering selling their digital business. it is a really interesting business on the weather channel. a great bloomberg story a few weeks back. i will treat that out. fascinating business, fascinating data story and the way they use computer science to build this business that works together. it will be interesting.

olivia: why is this digital business so much more interesting than the linear tv business? corey: i think the digital business will get a higher multiple. but thes are cracking weather channel up a very good weather app. olivia: i default to the apple one but i have been told to get yahoo!. corey: yahoo! is nice also but the weather channel looks nice. live doppler on your phone. september may not be the month for that said hike after all. the minutes came out yesterday afternoon. bloomberg's chief economic economist joins us and peter hayes at lack rock, -- at black rock. economic dataf since then, but it does give us a window into what they were thinking. what do we know now that we did not yesterday?

>> we take a watergate approach to reading the fed. corey: always a good approach to take. with the with a read question being, what did they know and when did they know it? they were concerned about the impact of the strong dollar, china,low down with falling oil prices. all of those things have intensified. what did you know and when did you know it? since they wrote those minutes, conditions have deteriorated in the markets acted accordingly. futures dropped as a result, so the odds of september increase slip from 50% premium is to 38%. olivia: investors reduce their bet on september rate hikes, so let's talk about deteriorating conditions. showing a slow down for the month of july. how much do you think that will influence? as cool aspi report, it was, the only hotspot was the rental sector, hotels, motels, school lodging, and also primary

residence and rent. if you look at cpi excluding rent, not a lot of inflation. corey: no rush for the fed. let's save that for another segment. ridiculousa proportion that we will talk about later. olivia: let's keep that on radio. carl: much for radio. the key point being that there really is not a lot of inflation pressure, however, the fed does feel a sense of obligation to move in 2015, so i still think that we are oscillating back between september and some other date in 2015. either october or december, but the more important point is the fed is becoming more dovish which means the post liftoff pass will be more shallow. we will get a rate hike this year but i think it will only be one and i also think the next time you look at the dot plot, we will see a slower to directory. olivia: more shallow slope. corey: peter, what do you think?

peter: i think that is black rocks view. because of the credibility issue, they had that the mandate in place of unemployment and clearly they are winning on the one, so i think they feel the markets are pressuring them into heightening and it is likely they will go one or two but i think it is important that the past and the level will be important and i would argue that does it really matter to the interest rates? i grew up in an environment where 200 basis points was a typical fed tightening and we are likely to get something much, much less than that, so it probably does not matter as much. about the chandra dollar? the fed has said so far the things i could delay rate hike appeared to be transitory. carl: all of these transitory factors they have been siding, like dipping oil prices, the strength of the dollar has strength of fight -- have intensified.

somenk that is giving them cause. in 300 basis points in a typical fed cycle. if you look at financial conditions which is arguably with the fed is trying to influence, not so much that funds but overall financial conditions, the strengthening of the dollar over the last year is the equivalent of about 200 basis points. markets, especially the dollar, are doing heavy lifting for the fed. olivia: dollar strength is tightening credit. corey: carl riccadonna, thank you. we will see you on radio. carl: hear me on radio. corey: i will see you and everyone else will hear you. stay with us. olivia: please. we will talk to peter hayes about the puerto rican debt crisis. it failed to make waves in the markets and that shocked all of us. in fact, july had the best performance in three months. --ckrock peter hazel be

peter hayes will be back in a moment. ♪

olivia: welcome back. we're back with peter hayes, the head of blackrock deposit this visible bond group which has billions of dollars under management. we turn our attention to puerto rico. a are issuing $750 million of new debt at first borrowing since one of puerto rico's agencies defaulted on august 3. back, af we take a step couple months ago, we thought that if puerto rico defaulted, it would battle the market and we would see rates creep up ,cross the country in geo visible debt, utilities, but it did not. why do think puerto rico did not cause panic? peter: there was an article in december 2013, a big headline article, that talked about the puerto rican debt crisis that

they had so much that it was probably unsustainable. since then, we have seen a drop in prices, a reaction in the market. a lot of the typical investors have been selling, so that risk has been transferred to different types of investors like hedge funds, from the typical retail bio -- by whose buying puerto rico just because they are triple tax exempt the who look at it as opportunistic. news has been coming in installments. corey: a series of haircuts for owners of bonds. leader: the price drop has gone atm back in 2011 at 1:15 -- 1.15. olivia: do you have a strategy for buying back into puerto rico or what are you looking for that would tell you now is the time to invest? peter: that's a good question. i think everyone has taken two sides. one side is for things that are

sustainable. -- we're looking for two things come at the end of this month, the working group, which has been commissioned by the government, you will see a proposal on what they will start with. if you look at detroit, they started at $.15 on the dollar. i think the bond market gets swooped by that. that is number one. corey: if they are trading at $.50 now, $.15 is less. leader: that's a starting point but that is considerably less. we do see another leg down. at that point in time, we think it becomes interesting because it is a governmental entity. they have to provide services, they cannot just go away and sellout the state house and go away. there is a recovery volume in each of these at we are looking to get back into the market. corey: there are also other nots of bonds that are moral obligation but revenue and

did may be don't carry the same kind of risk. peter: that is an important element. there are 16 different issuing allah -- entities and then you have the water authority which is a deal you talked about. they are trying to come to market. it remains to be seen, but there are different entities and may have revenue streams that are different than the geos and they might say they cannot pay that debt and we don't know how it will play out the clearly those authorities have a edit recovery scenario than perhaps the go's or sales tax. we broaden the conversation little bit in puerto rico. we were just with carl riccadonna tried to be out of the fed will move in september. what is a rate hike going to mean when it comes for the meaning market? peter: typically they mean higher interest rates. if you look at the way the curve is reacting, particularly in the front end with a two-year and five-year treasuries, they are expecting some kind of action out of the fed. the probability has gone down a little bit but when rates rise,

the missable's will buys as well. -- municipal's will rise as well. that is what we would expect this time around as well. corey: so maybe communities would be a place to be. across on the support categories. peter: you have to be careful about owning too much duration but they tend to be defensive and nature in those higher cycles. quickly, the limited size of a rate increase, does that dampen that? peter: i think it does. corey: or major duration wants to be short? peter: it has to be really short, the long end of the curve likely to be less impacted. if you're looking for income, you need to move the curb out a little bit. olivia: very interesting. i think i learned something. corey: imagine that. olivia: tv, it does help us. learn, including, we will be spinning to john hofmeister, the former president of shell who will be joining us

to talk about the plunge in the price of crude and why shell is spending so much money to throw off the coast of alaska. ♪

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with exclusive behind the scenes footage, all of taylor swift's music videos, interviews, and more. xfinity is the destination for all things taylor swift. olivia: we have not seen oil prices this low since the financial crisis. crude falling to just above $40 a barrel right now on global glut concerns. they lost one third to global supplies collect. corey: global glut. olivia: it's difficult -- global glut. since june, the price has fallen by one third. john hofmeister is the ceo of energy andfordable also the former president of shell oil. see why so much for joining us

this morning. right now, oil hovering about $40 a barrel and yesterday we got another report showing an increase in u.s. supply. looks like opec countries are producing more than ever and we are concerned about the slow in china. how much lower do think oil will go? to tell because it depends upon what global demand shapes up to be over the coming months. the industry is feeling the experience of its own success. based on forecast, back in the 2010-2011 timeframe, the industry invested aliens and billions of dollars to make based onmands predictions of global growth. well, the global growth in demand did not really to realize because economies were not strong enough. now we have the situation where we are overproducing and nobody wants to cut back because if anything, they want the cash that comes from the sale of oil to either pay their loans or pay is.eholders, whatever it

nobody wants to decrease production which is only complicating the problem further. until we get more global growth in demand. corey: we have seen a minor take up in counts, but the fact that there is any take-up and rig count, i find shocking in terms of pricing. what is compelling the continued drilling domestically with this collapse in prices of crude? john: companies operate according to a plan. each company has its own plan with respect to how much production it wants to make. wantnies on their own will to make the production plan because that is how they are measured, that is what they promised shareholders, and so what you see is not really an anomaly. it i actually companies performing to a plan. when they do that, they must have the economics all set up to do it, but it may be economics just to produce cash because they have loan covenants that have to be covered and they have

to have the cash to do it, or there are some companies that have really achieved amazing productivity improvements and they can afford to drill more and some more because of the productivity improvements which have lower their cost significantly. olivia: the productivity story is a huge part, and we don't talk about it enough. the epa came out with a proposal for new regulations to cut methane gas and mission from oil and gas producers by 40% over the next 10 years. how much is that going to hurt the producers? the majormost of companies, and they have been on an effort over the last decade to reduce methane emissions reasons.ly for two one, the sustainability issue that it represents, the knowledge that this methane going into the atmosphere cannot be good, so let's reduce up for that reason. secondly, why waste the gas when there is a market for the gas, let's capture it, let's get some value out of it rather than just learned off or rather than

wasted. -- just burn it off for rather than waste it. in some respects, the industry is leading the way and government is following. with this government in particular, there is a strong desire to control the industry as at the industry does not know what it is doing. for the last seven years or so, this administration has been determined to tell the industry what it can and cannot do on the industry really knows what to do. there maybe be some aberrant operators out there who are resistant to any regulations because they just do not like to be regulated, and those of the exceptions in this day and age, not the rule, in my opinion. corey: john, i know you are not at show anymore, but when i look at big oil and the capacity of big oil companies or placing their reserves as they take the oil and gas out of the ground, shell is worst among them in terms of reserve replacement and in an expensive way. what is it about the difficulty

that shell is having in replacing the reserve and finding new places for oil? john: shell has had a few poor very long time that materiality matters. it looks -- shell has had a view for very long time that materiality matters and they look for long-term material success. shell has also had a pioneering spirit over the many decades, whether it is the north sea, nigeria, indonesia way back 100 some years ago, and so there is a natural instinct in the company to go for what is big, to go for what is going to produce long-term value for shareholders, and to really test its technical capabilities. it is one of the leading technical companies in the world to see to it that whatever they do, they do no harm, they do it safely, but they do it with a long-term view, a 10, 20, 30

year time frame on the horizon. that is the nature of the company and that is what i experienced when i was there, and i have not in any change since i left. olivia: talk to us quickly about what you'd think is going on off the coast of alaska. are cuttingajors down on and right now, show is doubling down on the arctic -- does that make sense? john: i was the only made the decision to proceed and got the leases back in the 2006, 2007, 2008 timeframe. this is a potentially important research for the 2030's and 24/7 beyond. anyone who thinks we do not need oil in the 20 30's is naive or ignorant of the fact that the world will need oil. shell is a pioneer in this respect and a are the technology to be successful. it has to proceed based upon what they can afford and the decision to proceed this year is

a very important decision because the leases have a timeframe on them. if they do not see material body potential, then they might forgo the extension of the lease. you never know. corey: not just bets and oil but on gason gas -- but bets and it seems the market depends on growth, particularly in china and japan less so, and we are certainly not saying that right now. it's seems like there are near-term risks and shell in terms of performance with the big bets on lng. john cornyn i would not lose sleep -- john: i would not lose sleep. you may have seen recently the loss of life in china due to dirty air. gas and china are going to be married together for a very long time, and i think the best that show has made and other companies will pay off in the medium to long term even if there are short-term worries. a great guest.

thank you so much, john. olivia: thank you. time for a look at top stories. sears posted a second-quarter profit but there may be less than meets the. a $500 million gain from the sale of stores to a real estate investment trust. that and other items, the retailer posted a loss. plus, same-store sales fell at quarter in a 21st role. cost six don is the latest emerging market to give up control of exchange rates, the currency there fell as much as 28%. everyone -- corey: everyone knows that. olivia: seriously, nobody knows that. it went to a closing currency, so you are looking at the inverse quote. tenge down from the dollar. kazakhstan has been heard from declining oil prices. reese is getting the first chunk of its 95 -- greece is getting

the pressure of its $95 billion bailout. they are getting about $14.5 billion today in time to paint the $.5 billion back to the european central bank. the rest of the cash is spoken for by suppliers who have not been paid. in 2011,encoe republic six executives of the leading commodity trailer -- business became billionaires. now only three have that status. grand core down 70% since ipo. glencore fell almost 10% after reporting first-half earnings plunged. those are your top headlines. olivia: you've got to feel bad for those guys. corey: they are only worth hundreds of millions. olivia: they have been buying back glencore stock. corey: not afraid to buy other u.s. stocks. --ryone else will looking will be looking a little more

bearish and we will figure out why, next. ♪

coming up later today on "bloomberg market day," real estate mogul will be here to talk about live manhattan property owners are cashing out ahead of schedule, plus, his possible run for mayor of new york city. the shoes to fill from our founder of bloomberg news. corey: indeed. markets are luring investors equities but. our next guest is optimistic. david joy, happy at scene of the market, cheap market overseeing 815 billion in a $15 billion -- i am a glass half empty guy always, david, but i'm getting dated to support arguments

lately. what is the single most bullish thing you think people are overlooking right now? david: i think it is the strength of the u.s. consumer. the sentiment is a little bit cautious but if you look at balance sheets, they are in great shape. the strength that has been restored since the recovery consumer toshed the a very healthy position. we have created 12 million jobs, wages are not growing quickly but there are a lot more people working. now you are starting to see falling gasoline prices all over again after a few months of increases, so the consumer is propping up certain parts of the u.s. economy and it is sheltered from the weakness in the rest of the world. corey: we are not seeing that spending. we anticipated spending with low gasoline but walmart had zero sales growth. olivia: they had, store -- they

had comps store growth. corey: but overall, zero growth. we are not seeing really strong consumer spending, david. do you think it will happen? and saving rates have gone up with a suggestion that posted thousand 8, 2 thousand nine, people do not want to spend all their money like in the past. one, you are seeing an increase in retail sales after the slowdown in the first quarter. we had personal consumption in the second quarter of 2.9%, not great but better than the first. the last couple of months of retail sales have shown improvement trends as well. you are also seeing strength in the housing market, driven by a householde and formation, so the consumer is starting to come back. by the way, as far as saving rates go, it is height relative to recent history, but if you go back over the last 30 years or so, today's rated around 4% to

5% and quite low by historical standards. the consumer, i think, it certainly has firepower and starting to come back slowly, but i do think it is the sweet spot of the u.s. economy, if you will. olivia: but tocorey's -- but to corey's point, it is slowing. points that balance sheets look good, but how about prices? you did they consumer discretionary up 9.5%, and the best performance in the s&p 500, trading average of 22, that looks kind of expensive. do you think there is body to be had? david: i think you have to be selective. i think the housing sector and related industries are attractive. i think there is still a lot of strength left in the automobile sector although overseas, they weekend, the u.s. fleet is still

near its all-time high in terms of how old it is. i think there is a lot of demand there. i think the high-end of the retail sector still looks pretty good. high income consumers don't particularly experience recessions and they're continuing to spend, so i think you have to be selective. i would not be investing across the board, but there are pockets where i think you will seek strength, especially in the second half of the year. corey: you mentioned auto, and when i look at the changing nature of the loans given to car buyers are extending terms. not exactly subprime, but most of the loans given for auto financing right now are 72 months which is a longer period of time so that extending of credit has helped boost auto ites but it is not -- doesn't worry you? it doesn't.et

the first thing i would point to is the fact that compared to their historical experience, the quality of automobiles agent -- is much greater. people keep their cars longer. you do not want to forget the lessons of the credit crisis, so you have to keep your eye on those kinds of things, but does a conservative right now? no. not necessarily. consumer credit is only now just beginning to increase after years of the leverage. corey: david joy, we appreciate your time. olivia: still to come on "market makers," hewlett-packard prepares to split. why the company might look better in two. cory johnson will explain this to me. ♪

corey: welcome. a nice cool fog rolling in.

those are not clouds that they are melting stuff in the sky to make it harder. it is so humid and hot in new york. olivia: they're wafting over from new jersey. corey: a beautiful day from new york if you are inside looking out. olivia: nice to have cory johnson in town. corey: i like being here. hewlett-packard reporting after the bell. split intor will be two companies by november. one focused on printers and pcs and others on enterprise technologies, software and the like. they are hoping it will do something to turn around this. what you are looking at is year over year growth at hewlett-packard except that is not growth, that is shrinkage. that is the company getting smaller, selling less quarter after quarter. one recent exception and bloomberg's senior analyst joins us to look at hp, which you know is one of my favorite in the

world. >> the revenue growth is in there, the earnings growth is in there and you can cross cut your way and that is the bottom line. you have a model that is dramatically pivoting toward the cloud. pcs are not that important anymore and the pcs that are out there are staying out there longer. -- i woulduld have argue you have an industry turning toward the cloud but hewlett-packard turning toward the cloud is showing great results. >> it is not. part of the problem is the model dell, they are pivoting toward the private clouds and most of the growth has been on the public cloud. corey: explain the difference. >> public cloud is issued by a few different companies, google, facebook, amazon, alibaba and so forth. they build servers using non-brand-name stuff,

particularly avoiding companies like hp, dell, and ibm or lenova now. they are sidestepping brand-name makers and that is where the growth is in stores, in servers, -- amazon,lever guys with facebook, google, and double making their own stuff. they are building customized stuff or their needs. >> meanwhile, corporate i.t. spending growth is 3% and data center growth here is in the 30% and 40% over multiple years. corey: i think it was 30%. how do you pivot your entire company, which for decades has been primed or corporate i.t. spending, and meanwhile, corporate spending is we get best and public growth, public cloud spending is great. olivia: sentiment is negative, the five-year revenue spend trade is abysmal, what will move the stock when results come out?

>> i think there will be focus on split mechanics given that the split is impending and they want to see progress on that. they want to see progress on how .uch cost is going to cost it is already a pretty high number that they have set and we want to see -- olivia: what would they have to say to have it higher? lack of negatives? corey: how did they come clean on restructuring plans? the last two quarters have been suggestion of oh yeah, we will last quarteroffs, -- yet, more researching after the split it which is amazing if you think about what that means. we have figured out the way forward of having these two vehicles that will operate all the one is going right into the shop. nand: it has been getting bloated over multiple years. this will take a lot of time to undo the damage if it can be

undone. business,es particularly, need tell. pc might be interesting in so far of how much more negative sentiment there could be in the industry. if that flat lines and bumps it along the bottom, then pcs could be an ok place to be. olivia: no more negative news is positive news. got it. thank you so much. is waiting for results. corey: i am. i love hp. it is a beloved company still. it is the heart and soul of silicon valley. i think everyone -- >> and created more interesting companies along the way. olivia: and now they're creating one more by splitting up. jack kicking up, off the next hour of "market makers to come stay with us. -- "market makers" so stay with

us. ♪

former president jimmy

carter will have a press conference later this morning to talk about his cancer treatment. lastly, president carter said that liver surgery discovered cancer that had spread to other parts of his body. you can watch jimmy carter's full press conference live at 10:00 a.m. eastern time. this: time for our picture segment. we take a look at the best pictures of the morning. check this out -- idaho looking at a piece of prime real estate. that is kind of cool. that is 71 acres, 11 bedrooms, and 10.5 bathrooms. sunrmer lehman brothers valley crib and can be all yours for the low price of $30 million to $50 million. those are the estimates. olivia: apparently, there is a minimum did of $20 million and you have to put down a $500,000 deposit to get involved in the

bidding so they can be sure to take you seriously. sun valley is a beautiful. corey: it does not come with the fisherman. olivia: you can live out your fantasy. ever wonder what happens to your luggage when you leave it at a backdrop? created a amsterdam luggage cam so you could see what your duffel gets up to while you negotiate security. the video offers a glimpse of the airports massive transportation network that travis really get to see. corey: cool. the sunshine state may want to rename itself the golden state. they found 350 gold coins off the coast of florida. treasure from an 18th century shipwreck and 11 ships taken out by that hurricane with $4 million of coins. olivia: that is so cool!

corey: the state of florida gets 20% of that according to the law there. stuff. ♪

>> live, from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. olivia: good morning. corey says we are in for eric and stephanie all week. i miss them. when i come to visit and they are not around. futures, in the red. concerned about global growth and china. talking about that with al sturgis. here's a look at the top stories we are watching.

the number of americans filing for unemployment benefits state low last week. jobless claims rose by 4000. the total has stayed the low 300,000 cents march. that is typically associated with an improving job market. a takeover in the pharmaceutical business. buyant has agreed to sprout. valeant will give sprout a share of future profits if milestones are reached. biggest revamp of the firm's structure. bank'sy abolish deutsche 19 executive committee. you still have a chance to bid 71 acre spread.

it was delayed by four reeks to let more bidders participate. $50ould fetch as much as million. those are your top headlines. corey says no signs of letting the valuation. futures are down in the u.s.. equities are -- -- ra groep focuses on let's start with china. china is what has precipitated the growing selloff. >> every piece of data we get. tonight is having a slowdown. it is a little bit overdone.

the economy is up to 50%. that is growing. in the meantime, on the manufacturing, they are not exporting or him putting -- or importing. it has put the rest of the world at risk here. mean the rest of the world, not just what we are talking about, not just china. it is the rest of the world. it will keep commodity prices low. the biggest worry is russia. >> we have seen a lot of pain out of russia. what do you think it will be worse? >> we have not seen action. i am afraid with oil staying where it is, with the sanctions having an impact, with some

signs of political turmoil, we that see russia do things are more surprising than china and devaluing its currency. that is a concern. we remain cautious across the board. olivia: what signs of political turmoil are you seeing? a lot of people are saying vladimir putin's grip on power is ironclad. >> it will affect all of the ss are area we are seeing some activity. some pickup in activity in ukraine. we are seeing some currency issues.

i think we could see russia, putin, do some things that would ,ot be expected geopolitically to divert attention from what is happening. i am not sure everybody within russia is x -- is accepting that. if you are the economic or political elite, you are not being helped by the sanctions or anything that clinton is doing here. we forecast regime change. i do not think that will happen. at some point, things have to change. suspect we will see turmoil.

olivia: the most important stakeholders are salty that they are not getting their -- and china. >> it had been a surprise because they were holding the currency equivalent to the dollar. they had also, in addition to their export number, gotten messages from the irs, that if -- they have to be more transparent. when this settles out, china is going to be growing faster than any developing country in the world.

can see the currency after we get these speculators out of here. it is a developing country, but it is big and it is having impact on the developing countries. i classified china as a developed country. : the markets getting ready for a rate hike. 's jeff with us after the break. ♪

olivia: minutes showed policymakers did not think conditions for a rate hike have been reached yet. is with us on set.

segment, the numbers showing a slowdown. that is nowhere near 2%. >> the fed has said they do not expect to reach 2%. i am not sure if inflation is the basis of what they are deciding to do. we have no discovery of what the rate is at which banks should be lending to each other. we are not going to know what should be the right rates out there. going to do something in september. we will see revisions in the

employment numbers. >> a does not feel like we have good metrics to measure inflation. >> a big chunk of people who own homes, they asked how much could you rent your house out for. i do not have an idea of how much i could rent my house out for. rent costs are higher, everything is higher. it is a good thing we have commodity prices down. to try to push rates up, to push

inflation rates up. >> what do you do when your allocation, particularly the whenfunds, to benefit from those risks come to fall. these are managers who look .t individual companies they are not looking at sectors. they are paying attention, but they are make decisions on and short. if we are running 40% net long now, that is where we are. we are generating out for on the long and short side. we are moving into a different environment. this is not a beta environment.

friends are suffering from our location. you come and talk about risk, i do not know if you have money in the short or not. >> we are not allocating to short only funds. >> why not? we have managers who had -- you can operate on the long and the short side. be a not going to beta-driven market. there are companies that are going to do well. we are going to see more dispersion and results here. we want managers who are doing that. i grew up analyzing companies. that is how i spent my career. we are getting back to that. corey: aren't you already hedged ?y other investments in places

>> it depends on what else you are doing. you have to take this portfolio by portfolio. i do not the flexibility. the truth is, with a couple of , the short only guys are not too keen on doing that. whatdo not want to expose they are doing. we can do that if we have managers. the short only managers want to stay. they want to be private. most equity strategies, particularly in the liquid

unless you have some special sauce, you do not deserve the two and 20. there are managers who have that. with in thee, but -- side, it is flat fees. olivia: great to see you. we appreciate your time. the street with a 20% growth? will it be enough? will they notice the lack of profits? the earnings preview is next. ♪

olivia: the islamic state is claiming responsibility for a thebombing in egypt area attack was vengeance for the execution of six militants. prompted movie changes. regal is checking bags nationwide. it is an inconvenience, but will provide better security. the discover card, credit card users rate discover higher than american express. number one cents the survey was started nine years ago. now, discover has the top spot. has spent billions and

acquisitions as sales in its core products are growing, but maybe not as fast. senior analyst joins us. the coreoing on in business? >> it is growing five times faster than the original. it is all access through the internet. the industry has been growing faster. have several products. mature.s cloud became they moved on to another product. the growth has come down in the 20% range. that is the big issue.

olivia: a couple of months ago, i asked my brother if he had a cd of microsoft word. that is software as a service. increasing. >> it will be the biggest deal over the next few quarters to come. there is a lot more marketing muscle than these companies. times work.20 these guys are getting very serious. it is not as if the whole world will move to the cloud immediately. you will have additional competition. corey: salesforce spend a ton of money on marketing. a time period,r

salesforce has spent so much on acquisitions, how much has that made the revenue growth look better? >> you would need a lot of those products. sometimes, it is not fast enough. corey it will be an interesting quarter to watch the sales force. olivia: do not go away. we will be right back. ♪

♪ ♪ ♪ get excited for the 1989 world tour

with exclusive behind the scenes footage, all of taylor swift's music videos, interviews, and more. xfinity is the destination for all things taylor swift. olivia: welcome back. theseegan is here with three things you need to look at today. also, the chief macro strategist

with billions of dollars of assets under management. corey: disney downgraded to the equivalent of hold to buy. most at for the company risk from this court cutting -- this court cutting phenomenon. disney, bad news for the leaders of the bull market. before early august, when it started sliding down. more bad news for these stocks. this is an espn downgrade. the pricing power of espn is limited. the growth of disney is therefore limited.

netflix, eating everyone's lunch. go to 32.ld that would undershoot the lowest levels during the recession. all sorts of ramifications for this that are on folding. olivia: it was surprising to see u.s. inventory report showing a tick up. i think oil has two problems. a supply problem and a demand problem. on the demand side, the world is

slowing down. the emerging markets are slowing down. on the supply side, you have a couple of problems. you have the dollar going up. you have these countries that are oil producing countries that need to pump oil out of the ground. they do to make this revenue target. that is one of them driving the story. it is easy to take oil out of the ground. it took you two or three years before you got your first drop out of the ground. it is not surprising oil is doing what it is doing these days.

>> junk bonds. an index reached the highest level. --re is a lot of industries >> what is that sound? >> that is the opening bell. olivia: i have a cool chart i want to show you. what does this show? >> it is junk debt. this is a big issue. >> that is high. a lot of people do not like this disconnect between the way junk bonds go in the stock market is

holding in there. debt isad on junk widening above treasuries. with ashould move correlation to junk bonds. the junk bonds are reacting. the cds, is that the natural hedge or a new short bet? >> you saw this convergence start around june of last year. there are a couple of explanations for this. supply and credit has kicked up in the last few months. the other reason is oil. oil, it hastake out

underperformed stocks. explanationimple for it and then there is a more worrying explanation for it. america has started to read level again. when the worrying thing about this is, these things have happened before. 2007, the fed ease new eyes in the stock market.

credit market term going to long-term capital. two years later, the nasdaq 5000. >> maybe it is an ominous signal. how do you want to play it? are you cashing out? trends like that tend to last a long time. we think there are parts that are compelling now. assets taking it --the chin primarily >> is it ok to write that off? >> you cannot write it all off. that is how we make our bread and butter. people have thrown up the good stuff with the bad. it is not about what you want to sell, it is what you can sell. there is some opportunity. olivia: what is not very sharp?

>> we are looking for things unrelated to what is happening with commodities. runways orhat have do not need to access the market in a short or medium term. it is not a broad sector or individual name. it is about getting down there, looking at the company and balance sheet and seeing who is going to survive. corey: how do you screen for that? we look at things that fall and see whether that price will be justified given what is happening with the company. >> the fed minutes came out yesterday. it looks like investors reduced s.eir bet

what do you think? >> these minutes were before the china devaluation. what has happened in the last few days, the world has acknowledged there is a problem in the emerging markets. the s&p continues to barrel forward and the rest of the barreling over. the fed coming out and saying we are worried about china and this , it is going to force the market to say this is not going to happen. ultimately, it is the location and direction. growing?onomy probably not.

olivia: our thanks to the chief macro economic strategist. corey: what is moving the most? julie hyman is here. >> let's talk about the drug deal. valeant agreeing to buy sprout pharmaceuticals. recognitionined over the past couple of days. sprout is not a publicly traded company. valeant has been inquisitive. it has bought 12 companies in the past year. thoseg was the largest of four. eli lilly out with study results boosting the stock by nearly 5%.

it was testing one of its and it showed a cardiovascular benefit according bloomberg intelligence, it is the first drug to show that kind of benefit. a data storage services company has been caught off balance by the movement to the cloud. the new ceo is trying to turn things around. they beat analyst estimates even though revenue is declining. >> it is a big day for cory johnson.

>> i got excited because i thought julie was talking about net-a-porter day -- net-a-porter. a lot of strengthen the housing market. we are going to get the latest read on existing home sales. with the new data confirm the bullish outlook? not to mention, your local realtor. to pimco'sg to speak managing cio and director. ♪

>> existing home sales.

it would be down from the prior month. on housing. how should we interpret the results we are about to get? >> the results will be strong. number one, demand. jobsave private sector being created in the u.s. economy. it is the strongest it has been in 15 years. you are at 15 year lows. houses are starting to form with more confidence. we are under building versus

long-term demand. the 55 year, average is 4.5. we have a shortage of houses relative to job growth. thanks are starting to lend again. credit is becoming more available. all three of those point to a constructive outlook. >> there is a structural shift. millennials are not going to buy houses. >> which you are seeing is this is cyclical. people get more confident. you'll notice on the most recent data you are seeing a shift

towards more single family construction. industry that can see double-digit earnings growth. is very bullish. is very positive. >> the easing of credit gets worse because people cannot afford the credit anymore. it will affect their mortgages because it will make their rates higher. >> owning a house today is incredibly cheap. inwould take a 2% rise

mortgage rates to go back to the long-term average. that can be handled in a -- in --economy that is handling look at california. you have a significant shortage -- you put the money to work. >> tie your money to an industry that is growing faster than the economy. you want to own home improvement title insurance

volumes willse increase housing trends. those will see faster than normal earnings market growth. time for a check on the latest headlines. the government is getting about .4.5 billion dollars the rest of the cash is spoken for by suppliers who have not been paid. thetwo front runners in presidential race are duking it out with each other.

fewer than 200 people showed up to hear jeb bush. a company that handles media for athletes say each of lebron twitter messages is worth $140,000. the superstar has more than 23 million farmers -- 23 million followers. looking to the iron banks for a possible sale. digital business has a sunnier outlook and linear television. we will tell you why. ♪

olivia: welcome back. julie hyman joins us.

julie: mike regan mentioned one of these. another media downgrade from bernstein for disney and time warner. tv is entering a structural decline. the mostpanies with favorable. this has been the growing sentiment after disney and the other media companies came out with earnings. finests had been putting a point on it. fromr liquidators, raised high to hold.

with management. long-term growth outlook, the prior outlook was too conservative. stock has fallen 80% year to date because of the press about the company's products. micron getting another downgrade. there has been a stream of them recently for the memory chip makers. stock is down 4%. blendedysts are saying pricing could fall by 20% next yearw and early on the back of weakening demand for pcs, among other reasons. 56.ia: stock down

corey: the owners of -- have explorergan stanley to a possible sale. it is considering only selling its digital business. why sell just the digital business? findey may not be able to a buyer. right now is not a great time to be selling assets. it is difficult to figure out what this is worth. we have seen the value can quickly diminish. that is what happened with directv, not that long ago. they dropped the weather channel and said it did not have significant subscriber losses after it happened.

maybe the value of this is not that great. olivia: isn't it the same business? isn't it going to be difficult to separate the two. >> a buyer that wants the digital business -- >> you can set up the companies that do different things, but this is doing the same thing on different platforms. corey: the data from paypal helping ebay. olivia: we are a news network. i do not get how you sell off dot-coms. weather.com relates to the weather channel. also has a couple of digital

assets that are more be to be. it is more data. dataould probably sell the you have to remember the owners going to have to get out of it somehow. they may end up saying, maybe now is the best time. they have been looking for a buyer, or interviewing banks since last year. the fact that it has not happened, it is probably an indication there is no immediate buyer. they have sam champion over

there. >> i think the coverage has been solid. corey: they have integrated a lot of reality programming that has gotten a lot of flak for them. >> tomorrow on market makers, top forecast interview prices. stay with "market day." ♪

>> good morning, everybody. 10:00 a.m. here in new york city. matt: welcome to the bloomberg market day. >> the plunge continues. latest for its currency, sending

the stock lower for a third straight day. matt: the latest all manufactured to begin work on a car to make driving more sociable on the road. ♪ olivia: good morning, everybody. matt: we want to get to breaking news. olivia: let's get over to julie hyman at the breaking news desk. julie: the numbers are coming out better than had been estimated. 5.59 -- 5.4 3 million is what economists had estimated. we are seeing the highest level since february of 2007. with some ofstent the other housing data we have