opportunity to stand up to russia. the president refused to publicly condemn russian interference in the 2016 election or warn against future meddling. in washington, chuck schumer said, "in the entire history of our country, americans have never seen a president of the united states support an adversary the way president trump has supported president putin." for the president of the united states to side with president clinton against american law enforcement and american defense officials, american intelligence agencies, it is thoughtless, dangerous, it is weak. president is putting himself over our country. house speaker paul ryan delivered a strongly worded statement saying there is open vote no question russia interfered in the 2016 presidential election."

ismany's foreign minister calling on the european union to readjust its relationship with a u.s. can no longer rely on the white house after president trump called the eu a foe. his comments are in line with chancellor angela merkel's that says u.s.'s reliance since world war ii is, to some extent, over. and they must take their destiny into their own hands. cited a trade relationship he says is detrimental to american interests. a judge ordered a temporary halt deportations of reunited families separated by the trump administration after crossing the southwest border illegally. the judge tod delay deportations of week after reunification. request said that its

is a response to "persistent and increasing rumors that mass deportations may be carried out eminently and immediately upon reunification. ships, italy'sol government had kept military ships from docking for two days until other countries that doug in the latest standoff over migrant rescues. those were allowed to dock after a half dozen european countries promised to take some of them in rather than leave italy alone to process their asylum claims. gathered on the streets of paris to welcome home the world cup champs. .t france's team took a victory the players will also attend a reception at the presidential palace. croatian 4-2 sunday in a world cup final in moscow. a day onws 24 hours air and on tictoc on twitter, powered by more than 2700

journalists and analysts in over 120 countries. i'm mark crumpton this is bloomberg. ♪ >> live from bloomberg world headquarters in new york. >> i'm jason kelly. >> we're 30 minutes from the close of trading and stocks are mixed. the s&p 500 falling just before the 2800 mark. >> at the question is, "what did you miss? miss?"t'd you call theal counsel pressure probe a disaster. the investors president david

solomon has the next ceo as early as tomorrow. and bench watching by the numbers, investors will be watching netflix's domestic and international subscriber growth when a report earnings after the bell. plaques what -- >> what'd you miss? the concerns of the stickiest political traps that we will try to avoid for lawmakers tomorrow and wednesday. here to help us is the outlook in an area of rising trade tensions is joe davis, global chief economist at vanguard. thank you for being with us. let's start with trade tensions and some of the politically fraught questions that chair powell is down to get starting tomorrow. is it how he responds? what kind of questions do you expect he will get? joe: it is a tough balancing act. you want to reaffirm if you're the federal reserve, confidence in the federal reserve.

the labor market reforms as a financial market. even the progress on inflation. in that sense, you want to convey confidence in your plan. at the same time, strike a cautious note with respect to the risk that may emerge with increased probability over the course over two years. i would anticipate more of the same moving forward. >> what are the risks you expect him to hear as he's questioned? for any economy. it that is the u.s. and china. we see that up north in canada. it is something that, although we have seen rising tensions, it is the current tariff that will not materially impact the outlook. blackrock's larry fink bloomberg television early today and set of president trump went

through with his $209, he expects a 10 to 15% drop in u.s. equities. we don't even need trade tensions to have a 10% correction in the stock market. we are projecting 70% august because of the level of valuation in the equity market. and a little bit more restrictive monetary policy. i can tell you, using the federal reserve's own models, given the tariffs proposed and recently enacted, it is tough to generate a material impact on the economy. i'm not saying there isn't an impact but it is tough to generate significant headwind to growth. that ifrtant issue is markets start to anticipate even further escalations, it would lead to rising uncertainty. i would expect more aversion in the financial markets. what numbers exactly are

you going to be looking at to see what the effect of trade tensions, trade war, tariffs, etc. -- what are they going to be? generalre is the nonlinear impact. the higher level of tariffs on thatollar of imports, as number escalates, the greater the impact. roughly, where you would start to see in our mind and our judgment, it is roughly $500 billion. this is where it gets tricky. what is also going on with .espect to partners more important than the dollar amount we are focusing on is the number of rounds of escalation. and even if it was two dollars from one route to the next, i think that becomes a little bit less likely that we would see a negotiation that ultimately, we believed to be a course of action. >> rhetoric from europe last week, does that make you more worried that it will be worse before it gets better? --: it is more of a conflict convocation. it is hard to see in the next

two or three months that we will see material dissertations. you have increased tensions economy andu.s. chinese economy. ultimately, it will be a positive development in the sense of trade relations. but it could get dicey here. we are cautioning and inviting -- advising investors to look through this volatility that could very well spike in the next several months. lisa: does the fed have the belity -- the wherewithal to able to look beyond that volatility as well at this point? how much are they going to have to factor in the trade tensions? joe: in one sense, the way they respond to increase tariffs as the banks have responded to oil shock will increase inflation. no central banks would say if that is a game to be permanent, you tend to look through that.

alters the fundamental trajectory of the economy. i see the federal reserve with an increased risk for a pause. we can't get through a conversation without talking about a flattening of the yield curve. treasuries are the highest they have been since before the crisis, a new post crisis high today, 2.6%. even if there isn't a recession, they are getting paid. joe: i wouldn't be recommending cash. it we recommended for investors to stay diversified. it would included treasury market. it is important to separate the short-term yield curve when they are fresh on the two-year. i don't see that relenting in the near term. it does not surprise us that the 10 year treasury has not moved fundamentally over the course of the year plus or minus 20 to 30 basis points. it is determined by global forces.

lisa: you don't think this is doom and gloom? >> it is always dangerous to say that this time is different. the federal reserve is little bit more restrictive. to see you, joe davis in the studio. when it comes to managing money, there is no firm bigger than blackrock. shares of the wealth management giant declined today as i can order flows disappointed. the ceo larry think sat down with erik schatzker in interview. larry: some of the outflows we witnessed were money being used for m&a. some of it was used for stock repurchase is. too large ofat is a generalization. we had money put to work and $8 billion in multi-asset. we had money being put to work

institutionally in fixed incomes. we had money being put to work in alternatives with $4 billion of commitments and flows. retail, i would not say retail is done by any means today. as retailers migrated more towards a fee-based relationship, that is an institutional relationship. are creating models and navigating around the money. what we aree seeing, the retail flows, those are the right thing. most people say retirement. that is what we are continuing to see, positive flows in retail. if your time horizon is five years, they may be should reduce some risk. you have to consistently put money to work up or down. you should dowhat but that historically is not

what retail investors do. tory: as more money moves advise, fee-based. that typewill not see of volatility. that is a positive. so uncertainty due to the breakdown of the international order, the confrontation between the united states and china continues, what is the picture look like for flows? what do investors do? larry: they may go more into bonds. they may invest into alternatives. i believe investors will look at this is an opportunity to get back into equity. i'm not worried about flows. erik: investors are worried about flows. larry: my flows are fine. we had flows like this in 2016. two other times in the last five years, we always have positives when markets are trying to digest information. i believe we have never been at

a better position. a deeper dialogue with more clients. we work on bigger assignments than we ever have right now. i will still assert that our flows will be fine over the course of the next 12 months. erik: if you are right. if that continues, blackrock as a $6.3 trillion money manager today. where are you two years from now? larry: i expect us to be larger. erik: i would think that would be a certainty if the flows continue. that investors focus on at blackrock in particular is organic growth. this is been largely in organic growth story. we look at revenues, operating income, and as you said earlier, our revenues are up 11%. i would try to do that every quarter if i could. erik: but they wonder, as

trajectory slows, and they are still looking for growth -- they want to see more earnings and revenue. how do you get it? larry: no firm in the investment business is in a poor position whether it is index, alpha products -- and more importantly, we didn't talk about technology. our technology services business is up 25% last quarter. and aladdin is a lot more than what it used to be. working with custodial banks. so we actually have great growth. we've never had a 25% growth rate in our technology. it accelerated this quarter. we are not going to state that it will continue to grow at this rate. it certainly accelerated from the midteens to 25 percent. erik: it has been a strategic

priority for a long time. what else is on the list right now? larry: we are working on retirement. new ideas for retirement. 80 dialogue with very large organizations. looking at how retirement and corporations should work. if we succeed in this, we will see huge opportunities for growth. we have invested large sums of money in the alternative space. more flows.see many we are going at it right now, in billion a year alternatives. that is one thing we are trying to get most investors to start looking at. about asset flows, it's about revenues, too. lose $16 billion or $13 billion in equities and lose a few hundred thousand dollars. we could pick up a few million dollars of interest in some type of alternative products --

erik: a high-margin business. larry: we have worked with investors this last year to focus on revenues. and i think we proved in the second quarter that we are quite strong. on a relativeives basis is still a small piece of the blackrock puzzle. larry: $130 billion and growing. erik: you compare that, as people do, to the kkr's. about the same size. blackstones. the we're the sixth largest alternative manager and growing. what do we all look like? we will be higher than number six in alternatives. erik: you need acquisitions to gain in alternatives? larry: we did a small acquisition. we are in the midst of growing our long-term capital fund right now.

which we hope to have closed in the coming months. is, probably not. we see very good opportunities right now. in termse best quarter of flows and potential new flows going into the new quarter -- going into the third quarter. not, but on a case-by-case basis, does it make sense to do more partner type deals? larry: we are not presently looking at anything in that way. are said in the past, we looking at mergers that we think will be transformational. it will be more technology for us as we continue to build our aladdin services or technology services. lisa: that was part of the bloomberg extensive interview with larry fink, blackrock ceo. time for a look at the business flash, a look at some of the biggest tories in the news right now. bloomberg has learned the inquiry on discrimination

focuses on pay disparity and other discriminatory conduct towards women. it is one of more than half a dozen central investigations in the ride hailing company that has emerged over the last year or so. thanks have a surprising gain in fixed income trading and a record jump in the consumer unit. the second quarter, there was a climb of 6.5% compared to a year ago. recently, the federal reserve reported household debt in the u.s. hit a record this year. adding institute is blockchain and cryptocurrencies as topics to his level one and two curriculum. this is the world of finance and crypto increasingly emerge. some say blockchain technology could change large areas of the global financial system. the cfa says the topics are not a passing fad. and that is your bloomberg business flash. what you miss? elon musk went off script on twitter and accused british

diver vern unsworth who aided in the rescue of the trapped tight use soccer team of being a pedophile. that tweet has now then deleted. they are now considering legal action. it tesla shares plunged 3.6%. we are joined by max, bloomberg businessweek writer. his elon musk mentally stable at this point? max: the truth is, we don't know. i will say that his tweets over the past day seemed an erratic -- seemed erratic. investors are concerned. but musk has always been a bit of a wild card on twitter and in the press. i have been talking to him for more than 10 years, and he has always been prone to say kind of nutty things. it is part of the appeal. the said, when you're in middle of this crazy

manufacturing sprint, tesla is in crisis. it is not brave when you're getting into random twitter fights with people that are considered by most to be heroes. massiveere part of a story, the cover story of bloomberg businessweek that explored a lot of the manufacturing challenges. and some of this is about the culture of the company and the influence there. what is going on and what is his state of mind? whatever it may be, tell us. is going on is elon musk is trying to wield the company towards hitting these goals which are basically arbitrary goals. but big one was 5000 model three sedans. the problem is, big car companies don't normally work that way. it is hard to see how tesla in the long run becomes a sustainable, profitable business if it is having to push in these kind of crazy ways.

that is a lot of what the story was about. complaints from workers of being overworked. -- very these slightly audacious design decisions that have not worked out. but there is a lot of tesla fans out there and the stock is valued highly compared to other car companies. part of the enthusiasm has to do with the product. people like tesla. heart of it has to do with musk himself and his face. his personality will be able to push through his vision. what are the ways we have to measure this twitter sentiment? people tweet about tesla and it is popular on social media. you see the price in white. the number of tweets about it in blue. and whether those tweets are negative or positive on the bottom. it looks like the negative tesla tweets have been taking over a little bit more than positive. to that's howve

far does he have to go to lose the confidence of investors? taking on basically a hero and that will never go well. tesla that on elon musk. and you talk to the locals, that's what they say. we think this guy is capable of achieving amazing things. on the other hand, it is also a brand. biggerit gets bigger and , maybe you aren't able to ride on this kind of slightly reckless and amazingly fun and wild executive. you have to be something more normal like a conventional car company that would probably be a horrible thing for elon musk to think about. but i think if you want to reach a mass market, that kind of evening out of these rough edges may have to happen. >> what is the next big milestone for investors? max: we get quarterly earnings in a week or so. the next big thing will be sort

of continued production numbers. we want to see 5000 cars per week. the figure can be maintained. this is a guy always talking about the future. we are expecting the model y, the compact suv to be unveiled. quick question about his political donations. he donated just shy of $39,000 to a committee backing u.s. house republicans. does this hurt his image with customers at all? max: it has been an awkward thing for elon musk. this dream car company, associated with a lot of liberal causes. he also runs a company called spacex which is a giant defense contractor. giant defense contractors have to do business with both sides of the federal government. there is a bit of tension here that has been going on for years. musk has reached a level of

prominence, and people are ready to jump on him. this disclosure about the donation to republicans wasn't timed well. julie: bloomberg businessweek's max chafkin. , deepn read that great dive into the production of the factory out in california in the latest edition of open bloomberg of "bloomberg-- businessweek" or online. prime, you to amazon saw some dogs instead. apparentlythe site spiked when the event began at 3 p.m. eastern time. this according to down detector which monitors trouble on websites. the estimates for spending on prime day, $3.4 billion, up more than 40% from the year earlier. when it crashed, there were pictures of dogs that are there

and the message from amazon. perhaps it wasn't a total loss. the site is up and working currently. it was temporary in terms of those ledges. import and clarification there. it is time for the stock of the hour. sinclair broadcasting, shares tumbling on worst-case since 2009. the sec has rejected the plan for tv station sales -- the sec has rejected the plan for buying tribute. this is an important ruling. lisa: you are right about that. there is so much dealmaking in the media's race. but it goes back to last year when sinclair agreed to buy produce media for the tv stations. it was expected to close out of this quarter or the following quarter. now we have the sec rejecting what is considered to be a controversial plan to win out tv -- spin out tv stations.

they owned a bgn in chicago -- own wgn in chicago. station in chicago, they are selling it to a car business whose owner is tied into a sinclair executive. thething similar to stations in dallas and the sec is saying this is not going to meet the ownership limit. sinclair,just hurting but also tribune media. a look at this chart for tribune media, absolutely plunging below the 200 day moving average. you can see why, down 60%, why the tribune media shareholders want this deal to close. it will be interesting to see what happens. netflix is set to report second-quarter earnings after the bell as streaming giant forecast more than one million domestic and 5 million international subscribers after beating estimates in the first order. one of the things we have been

watching as well is the valuation of the stock which is he getting to get a lot -- beginning to get a lot of attention. trading at more than 250 times earnings right now. the market close is next. from new york, this is bloomberg. ♪

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julie: "what'd you miss?" stocks missed as we see financials gain. energy and time elegy -- and technology pull back. i'm julie hyman. lisa: i'm lisa abramowicz. >> welcome to our coverage every weekday from 4:00 to 5:00 p.m. eastern. julie: we begin with market minutes, as we see this mixed picture for the minutes. technology pulling back here a little bit, down 0.25%, even as we see the dow gained on the session, gaining about 0.2%. financials strong. energy falling, along with energy prices, which we will get to in just a moment. continuing the trend of lower than average volume for the three major averages as well. let's dig into some of the big movers on the session. with financials leading.

, in part because of the big banks, bank of america up big, up 4%, its best day since november 2016 after the consumer unit posted its highest earnings in more than eight years. loans in that business of 6.6%, helping fuel the gains in the shares. arconic, having some speculation we have seen buyout firms setting their sights on the company. this used to be part of alcoa. it makes finished aluminum products, as opposed to the raw material. arconic is facing a number of operational challenges, according to morgan stanley. but the fact that a buyout company would come in is plausible. apollo global management is one of those named as a possible takeover for the company. tribune media, we were just talking about that here, after the fcc raised a challenge to tribune's takeover of some of the stations by sinclair, those shares down nearly 17%. amazon, we talked about some of the temporary glitches in its prime day promotion as the site

seemed to go down around 3:00 p.m. when the promotion began. we will keep you posted on how it's looking, whether you're going to see puppies ordeals on the website when you go to -- puppies or deals on the website when you go there. we saw some selling. a little lift across the curve. three basis points for the 10 and the 30. about two basis points for the two-year. we continue to watch the yield curve. lisa's favorite subject. we've been talking a lot about it, because you can't ignore it. of course, it's important. a lot of people are watching it. we see the gap between the two-year and 10 year yields. the smallest level, the flattest since 2007 dipping below 25 basis points today. just above it. rate strategists recommending curve flattening. saidrock's ceo larry fink

he expects the treasury yield curve to invert this year. however, he doesn't believe it signals an imminent recession, so the hot debate continues over whether there is still that clear recession signal. scarlet: indeed -- lisa: indeed. currencies, getting a reprieve from the strong dollar trend. a third day of dollar weakening. that's why you're seeing europe gaining versus the dollar, also versus the japanese yen. againstar is declining the russian ruble on the heels of the summit for the meeting, as president trump -- for the meeting -- summit or the meeting, as president trump would call it, with vladimir putin. i want to flip up the screens and get a sense of what's been going on in the commodity space. oil dragging the whole space down. the bloomberg about it he index down to its lowest -- bloomberg commodity index down to its since last year.

oil right now, brent crude down about 4%. 4.2% almost. you have steel down just a little bit. in just a touch after a couple of brutal sessions on the heels of concerns about what might happen with taras -- tariffs. those are today's market minutes. julie: we are awaiting second-quarter results from netflix. we have been anticipating it, not just today, but last week as well. let's bring in paul sweeney, bloomberg intelligence director of north american research and, romaine bostick of bloomberg news. estimate is for 1.2 one million domestically, 5.0 6 million internationally -- 1.21 million domestically, 5.06 million internationally. can they make those numbers? paul: historically, they have a

great track record of managing numbers. what drives the stock is really about the growth of the subscribers. it's driven momentum in the stock. may have an good about managing expectations on subscriber oodwth -- they have been g about managing expectations on subscriber growth. they continue to pour money into programming. >> talk about the international piece of this. is a big story in "bloomberg -- it is a big story in "bloomberg businessweek." incredibly aggressive goals in the push into asia. how successful are they so far, and what are the roadblocks? >> netflix is truly a global media company. they are in every market, with the notable exception of china. julie: can i interrupt you? we have the numbers. the number is coming out. the total additions in net streaming, 5.14 million.

that's the total number for domestic and international. the total estimate, 6.27 mil lion. earnings-per-share beating the $.79, $.85 versus analysts have anticipated. $3.91e below estimates, million -- $3.94 billion, excuse me. short on revenue, short on subscribers, beating on earnings per share. we will continue to dig through for some take that's -- some tid bits. lisa: we watch the shares plunge in aftermarket trading. i have to wonder how much investors are going to start to get worried about how much netflix is borrowing to burn through as they try to get that programming, as paul was just mentioning. >> this is a company where they have basically been able to spend that will as long as the subscriber growth kept coming. the fear that has been baked in here is that eventually that would either slow or ebb, and it would be stuck with all this debt.

your talking about a company -- you are talking about a company with an ebitda of about 6. disney has an ebitda ratio of about 27. this is a company that doesn't have a lot of wiggle room should the subscriber growth fall off. maybe they will rebound next quarter. we will have to see. it is a little concerning to come in over one million below what the street was expecting. keep in mind, last quarter, it was the flip side of this. they surprised about one million plus on the upside. right now you're seeing this rejected in the shares, down about 9%. >> it's interesting, looking into the top live blog, lucas shaw points out, same number of customers as added a year ago. to your point, that's not what investors have come to expect. they have come to expect growth on growth on growth. >> there is a slight miss on adds this quarter, but the third million -- third quarter is coming in about a million light.

the stock works as long as subscriber numbers keep beating. they will miss on the subscriber number and the stock takes a hit like it is here. the question is, when is that long-term trend developing where the net adds really are peaking? lisa: deal have a sense of what was driving the miss -- do you have a sense of what was driving the miss? >> there was a price increase a couple of quarters ago. did not impact it last quarter, but there's probably a bit of a lag. that might be an impact. this is a company that has had the ability to raise prices generally across the globe, across the markets. it would be interesting to see if they cite that price increase as one of the reasons for the slight miss on the subs. >> reed hastings in a shareholder letter says, "strong, but not stellar q2." julie: he also mentions hbo and disney.

how much is competition part of this story? didn't disney take pretty much all of its content off of netflix? >> the media companies have finally seen the light. yes, we like to get the syndication revenue that netflix gives us, but we known long-term that's not the right business model. people can watch programming on other platforms. the real question is, longer-term, is anybody out there capable of competing against globe -- netflix on a global basis? disney is saying it can, and that's why it will pay $70 billion or $80 billion more to allow it to compete against netflix going forward. lisa: as we watch the shares fall, down about 12% in aftermarket trading, it is important to point out that netflix shares have gained more than 100% year to date. what will it do to momentum stocks if netflix continues with the losses we are seeing in after-hours? >> this could have a big effect. it's a pretty big weighting.

primarily in consumer discretionary, which was one of the major leading categories for this market going forward. coming into this earnings season, the level of bullishness was a lot higher than it was in previous quarters. you can see that reflected in the call options trading. we were looking at increase in call volume by about 25%, 26% over the past two weeks in netflix shares. if you go back to the most recent quarters, two or three quarters back, we were only about 10% headed into earnings. there is much more bullishness headed into this, despite the fact we were up over 100%, because that's because -- but that's because people had bought into this narrative. this is a juggernaut. they are getting any nominations. they can -- getting emmy nominations. they can do no wrong. a lot of negative free cash flow. they just sold a lot of junk debt a couple months ago. julie: negative free cash flow

in the second quarter, larger -- it's not actually. negative free cash flow, it's pretty sizable. i want to bring in lucas shaw, who covers the company for bloomberg, on the phone here to come into the conversation. netflix seems to be saying it overestimated its subscriber additions were acquisitions -- or acquisitions. why didn't it add as many subscribers as it had anticipated? lucas: netflix has declined to specify. if i had to give an educated guess, it would be a mix of the lack of really buzzy shows in justuarter and then also some competition for attention from something like the world cup, which was only for a couple weeks of a quarter, but does tend to impact the number of people that sign up for a service like netflix, because they are watching something else and don't need to sign up for something new. in terms of the shows, netflix has always had its biggest hits

-- new seasons of big hits and new, buddy shows drive -- buzzy shows drive new subscribers. they didn't have that big breakout in the quarter, especially not with some of the older demographic they might be trying to lure in the u.s., where they had their biggest miss. julie: the company has made a lot of the fact that they got a lot of and me -- of emmy nominations. is that something that drives growth in subscribers? emmy nominations are irrelevant for short-term subscriber additions. they provide a little halo for the company, a patina of quality, and it also helps draw top talent to them. hbo has long been able to claim that if it was talking to some big producer, that you want to work with them because they had the most emmy nominations were 17, 18 years running. they can no longer say that. that's where it will help netflix. in terms of big shows coming up,

netflix always has something fun. the biggest hit on the service is "stranger things," which doesn't come until the fall, which may be one of the reasons why they issued a slightly more conservative estimate for the third quarter. >> paul, how much do they worry about the costs of acquiring that content going up with all this competition out there? paul: they are not shy about spending money. they will spend about $8 billion on programming. this year, by far the biggest amount in hollywood, and almost half of that will be original programming. they've talked about since day one, their business model is a virtuous circle, which is the more you spend on programming, the more subscriber additions you drive, which drives more cash flow which drives more programming,. that all works until it doesn't. then you have what's called a vicious cycle. you are sitting out there with $20 billion of long-term programming liabilities and maybe your revenue and cash flow's are starting to peak.

that's the concern for the bears. that story has not played out over the last five or six years, but that's always in the background. as was mentioned, they are in the high-yield market, borrowing money to pay for programming, which is really an odd situation. creditors will tell you, i have $175 billion equity cushion protecting my debt, i feel pretty comfortable. lisa: let's focus on that debt, because that's what i do. they have about $8.5 billion of debt from almost nothing not so long ago, and they have been really relying on credit markets. i am looking at their debt distribution. the weighted average to maturity is about eight years. they have some wiggledebt from o long room, which gives them a little bit of breathing space here. the biggest maturity comes in 2028. so, paul, do you think that creditors will give them the benefit of the doubt even with this disappointment? paul: i think they will. i think the track record is there for this company. clearly they are the dominant player on a global scale. not to say there isn't more

competition coming, potentially from a revived, larger disney, as well as some local players internationally. its one quarter every year, every five quarters, they miss. then we have the same conversation about is this the top of the netflix story, yet they come back with a better subscriber number the next two or three quarters. clearly, the questions for management on the conference call will be what really drove the lower-than-expected net adds this quarter and next quarter and what are you doing about it. julie: i want to bring it to you and the broader picture. if you look at nasdaq futures, which i have on the bloomberg right now, we've seen a pretty big hit here. netflix, one of the top 10 weighted stocks in the nasdaq 100. so, is this the sort of signal for the moment am stocks to come back -- the momentum stocks to come back? it was probably one of the more enthusiastically embraced stocks amongst that batch at the top. a lot of the other ones had not

necessarily falling out of favor, but there wasn't that level of enthusiasm there. you have that to a certain extent with amazon, which obviously has a huge waiting -- weighting. without netflix as part of this party, it's going to be a bit of a drag. we could not hold the 2800 level, despite the massive rally in financials. there just wasn't a lot of enthusiasm there. a lot of folks were looking to he techf -- kick off t portion of the earnings season with a netflix beat. julie: maybe some pressure -- >> such an interesting point. there is this broader ennui when it comes to tech names right now. cases,mistrust, in some maybe some skepticism. lisa:, i have to say, paul, disney shares in aftermarket trading, up just a touch. they are up about 20 basis points. it's still interesting. it shows perhaps netflix's loss will be the gain of the traditional media barons, who

have been really struggling. paul: that's clearly what bob iger is betting on, doubling down on content to try to go head-to-head with the netflix of the world, where as people like rupert murdoch and others have decided not to make that play, throw their cards, and let someone else fight that fight over the long-term. comcast and disney think they can complete -- compete against the netflix, facebook's, google's. that's playing out in the m&a space. julie: currency fluctuations. not something it has had to navigate inside for a very long time, how has it done so far? how do you expect it to continue to do? paul: it hasn't been that big of an issue. clearly, the vast majority of the growth for this company going forward, not just in subscribers, but revenue and earnings, is really going to be outside of the u.s., and their

costs are mostly u.s. dollar costs, although they do have some international production. they do have to be increasingly like a lothedging, of technology companies need to be. that will be impacting their numbers probably increasingly going forward. lisa: i'm just wondering, when we come in tomorrow, the dow jones and the nasdaq indexes, you expect them to respond to this, or do you think this is just light trading? >> there will be a response tomorrow, i think, unless we get some others that are upside bombshells that come out over the next 12 hours. that's not going to happen. i have one question i did pose to everyone that i'm curious about, the pricing issue and whether or not they have the leverage to raise prices and whether that could make up for some of -- >> that will be an issue on the call, to the extent that the pricing increases they've had in markets impact their subscribers.

historically, it has not, but you never know. there is always a point for every product and service, that they will probably come back and say, listen, we are going to spend a billion dollars in programming, people are getting a great value -- spend $8 billion in programming, people are getting a great value, but that's a discussion we will be having. julie: i'm looking at the earnings throughout tomorrow morning. johnson & johnson is coming out. goldman sachs. but those are not -- >> it's not enough. you've got powell midday, midmorning that a lot of people are going to wait on. this isn't the catalyst that we were looking for. julie: thank you so much, guys. bloomberg's paul sweeney, romaine bostick, and lucas shaw. those shares trading sharply lower in response to earnings in the after-hours session, down by almost 13%, after just about doubling this year. this is bloomberg. ♪

julie: "what'd you miss?" let's look at what the week this in that -- weakness in netflix shares means for the market. rob is joining us from newport beach, california. netflix shares continue to decline by about 13%. great to see you. thank you for joining us. we were just talking about netflix and its importance to the momentum story. troubles herets are also going to spell trouble for other momentum stocks? rob: of course there is a distinct risk of ripple effect. i published a piece a few months ago entitled "it's a bubble: so what?" in that paper, we talked firstly about the definition of the word bubble.

people use the word left and right without bothering to define it. secondly, we point out some areas in which the market is frothy enough to be characterized as a bubble. thirdly, we offer some advice on what to do about bubble assets. julie: all right. so, what do you do about them? [laughter] let's start with the definition. people use the word left and right. what is a bubble? we offer a very simple definition, and that is, in any valuation model, anything like a discounted cash flow model or anything like valuation ratios for p/e, that kind of thing, you have to use implausible assumptions, not impossible, but implausible assumptions to justify today's price. second part of the definition is equally important. in order for it to be a bubble, the marginal buyer, the person buying it at today's price, has to simply not care about any

valuation models were valuation ratios. -- or valuation ratios. is apple or microsoft a bubble? no, they are a little expensive, but they are not a bubble. julie: what about netflix? tesla, my netflix and goodness, does any marginal buyer of netflix or tesla look at valuation ratios or do they look at the story?i think in both cases they qualify as a bubble. being a bubble doesn't guarantee they will underperform long-term, but it makes it awfully likely. so, how worried should people be about those specific bubbles, tesla and netflix, popping anytime soon? rob: i think people should always be worried. bubbles can pop at any time. the other aspect of a bubble is equally important, and that is that bubbles can persist longer than you can remain solvent. in that paper, i used the

example of zimbabwe's stocks during their currency meltdown. late stages of the currency meltdown, but not at a end, the currency fell. and the stock market rose 500 fold, which means 50 fold in u.s. dollar terms. you could have been short zimbabwe stocks and you would have lost 50 times your money. ouch. [laughter] rob: the simple fact is, six weeks later, their stock market was worth less than step trading. you would have been dead right that it was a bubble and the you need to get out of the way, but dead wrong to short sell. lisa: i want to break in here. i want to get to the concept of indexes and how netflix accounts for a much bigger proportion of twonasdaq today than it did years ago or even a year ago since it share prices doubled. -- since its share prices

doubled. do you think investors are aware of their exposure, or do you think there will be surprise if there is popping of what you call a bubble? rob: yes. short answer is most investors in capitalization-weighted indexes are not aware of the extent to which frothy stocks, stocks that may be in a bubble, can dominate their portfolio. we did another paper entitled "buy high and sell low with index funds," in which we pointed out that stocks added to an index reliably tend to be very pricey stocks that are very popular, so that the index committee says, you know, we have to add this stock. stocks that are dropped 10 to be wildly out-of-favor, unloved -- tend to be wildly out-of-favor, unloved stocks trading very cheap. what happens after a stock is added? what happens after a stock is dropped?

in that paper, we show that the stocks that are added in the year after they are added under perform the market by two percentage points. the stocks that are dropped beat the market by 21 percentage points. wow. that's a huge difference. so, when it comes to indexing, stocks that are at the top of the list usually are very pricey. lisa: rob arnott, thank you so much for joining us. results.ap the netflix the shares are plunging more than 12% after they missed on subscriber gains. also projected, yet another miss. shares now down more than 13%, dragging down the nasdaq futures as people prepare for a rocky open tomorrow. we will keep going, bring you any new updates on this big question of whether people will continue to pay up for netflix's

inscriptions. from new york, this is bloomberg. ♪

mark: i'm mark crumpton with first word news. president trump today openly questioned his own intelligence agencies' conclusions that moscow was to blame for meddling in the 2016 u.s. election to mr. trump's benefit. he seemed to accept mr. putin's insistence that russia did not. he said he did indeed want mr. trump to win because of his policies, but took no action to make it happen. don'tent trump said, "i see any reason why russia would interfere in the 2016 election." president trump also called special counsel robert mueller's

investigation a "disaster for our country." washington congressional reaction was swift. john garamendi was on bloomberg television. >> this president has done nothing. he is a total dereliction of the oath of office to protect america. mark: john brennan, who was cia director under president obama and helped produce the intelligence report that first found russia meddled in the election, said president trump "is wholly in the pocket of putin and that his performance exceeded the threshold for impeachment for high crimes and misdemeanors." british prime minister theresa -- says the u.k.'s long time long goal remains a constructive relationship with russia, but she insists president putin should not get a pass or the kremlin's international transgressions. the prime minister spoke in parliament today. primary i agreedminister may:

with president trump in our discussions last week, we must engage from a position of unity and strength. this means being clear and unwavering about where russia needs to change its behavior. and as long as pressure persists in its efforts to undermine our interests and values, we must continue to deter and counter them, and that is exactly what we will do. mark: may added that russia must be held accountable for stepping up its arms sales to iran, shielding the syrian regime's use of chemical weapons, and launching cyberattacks on an industrial scale. a judge has postponed the new york city trial of a mexican drug lord. jury selection will now begin november 5. the judge made the decision after defense lawyers complained that prosecutors keep turning up potential evidence that must be analyzed before trial. pleaded not guilty to charges that his cartel laundered billions and orchestrated a campaign of murders and kidnappings. he faces life in prison if

convicted. global news, 24 hours a day, on oc on twitter, powered by more than 2700 and analyst in over 120 countries -- 2700 journalists and analysts in over 120 countries. julie: let's get a recap of netflix earnings as well as guidance. shares down sharply after just about doubling this year. the shares now accelerating their decline, down by nearly 14%. what's going on here? the company subscriber growth missed estimates. this is what we have talked about. this is the key number that investors watch. the company added 5.2 million users in the second quarter, about one million fewer than predicted. in the current quarter, it expects to add about 5 million customers, which is a slower pace than a year earlier and also below what analysts anticipated. the stock continuing to accelerate declines.

last looking back at the time you as had this negative of a reaction to its earnings -- last time netflix had this negative of a reaction to its earnings. we have not seen this kind of a negative reaction since then. lisa: "what'd you miss?" a good start in helsinki -- that's how president trump described his meeting with vladimir putin, but members of his own party had some very different words for it. "disgraceful," "flat-out wrong." he suggests he equally trusts u.s. intelligence and vladimir putin. president trump: all i can do is ask the question. my people came to me and said, they think it's russia. i have president putin. he just said it's not russia. i will say this. i don't see any reason why it would be. lisa: president trump walked away from this summit -- will

president trump walk away from this summit with anything other than criticism? ,ore from christopher preble of the cato-- institute. is there anything positive that came from this meeting between trump and potent? -- putin? >> there could have been something positive, but as with so me things related to donald trump and u.s. politics -- with so many things related to donald trump and u.s. politics, the indictments handed down by robert mueller hung over this meeting from the beginning. it was extremely difficult for the president to get out from underneath that, and some of his remarks, especially his unscripted remarks, during the press conference fed into the criticism, including from some republicans, as you know. while there is a reasonable case to be made for why the united dates and russia -- united states and russia should have better relations, there are

areas where we can and should cooperate, but, unfortunately given the partisanship and the credible allegations of russian interference in the election in 2016, it's going to be extremely difficult for president trump to make progress in that area. >> the president tried to walk a back some of his comments in a tweet just a while ago. "as i said today and many times before, i have great confidence in my intelligence people, however, i also recognize that in order to build a brighter future, we cannot exclusively focus on the past as the world's two largest nuclear powers. we must get along." what you make of that? -- what do you make of that? christopher: i had not seen that. it's interesting that he walked back his remarks from this morning a little bit. i think that it will take him affirming especially dan coats' ,omments last week and today

sort of indirect contradiction to what president trump appeared to say during the press directnce -- of in contradiction to what president trump appeared to say during the press conference. for him to continue to deny there is credible evidence of russian interference in the election, i think he will only encounter opposition, resistance, and criticism. it seems that the first step for him to take, while also, i would hope, affirming the importance and commitment he has to improving relations between the two countries. i think that's a reasonable goal, but he has to clear some of the air surrounding these allegations. julie: not just these allegations, christopher. as a scholar of the cold war and of relations between the two countries, i'm curious about the footing and the leverage that you see either party. one chart i want to bring up here takes a look at the gap between the u.s. and russia by a number of different measures,

including things like trade and landmass, but also on gdp per capita, gdp flat out, and on defense. the u.s. is far larger. we're talking about a country that has the gdp the size of new york state. and maybe it doesn't seem this way to you. maybe you could give us your assessment. it seems as though president trump has gone in here with already a lot of concessions, a one-on-one meeting with vladimir putin, with no one else in the room except for translators. some of the other concessions during the press conference itself. is that the right way to approach russia, judging from your historical knowledge? christopher: i don't think having meetings between the u.s. leader and a russian or before that soviet leader is a bad thing. i think that's called diplomacy. we have meetings all the time. i've never believed that talking to our adversaries is a concession in and of itself.

again, i think the president allowed to much or conceited too much -- conceded too much to vladimir putin's interpretation, which was basically a flat denial. that was a concession. but i want to emphasize the situation today is very different than it was in the cold war. the russians are playing a much dider hand them the soviets in the cold war -- hand than the soviets did in the cold war. it is a fragile economy. it is overly dependent -- julie: exactly. wrong fors it also the u.s. to display russia as a global superpower and come to it as an equal adversary? christopher: the president of the united states meets with many countries who are not our equals, by any stretch. russia is an important player.

it has a permanent seat on the un security council. it has nuclear weapons. they have the two largest nuclear arsenals. by that standard, russia is an important player. it does have the ability to work inthe gray zone of conflict terms of cyber, economic pressure. lisa:, to that point, we are heading into the midterm election. do you think this gives president trump -- president putin, i should say, the green light to say -- try to influence the u.s. electorate, as the fbi and cia have already said that they have in the past? christopher: i certainly hope not. i think it is important, incumbent on president trump to affirm that publicly, to restate what he said later on twitter, and to indicate the importance of protecting the sanctity of american elections. that means better cybersecurity here in the united, dates but also it seems -- in the united

states, but also communicating that interference in u.s. elections will not be tolerated. julie: did that communication happened today? christopher: not to my satisfaction, no. julie: christopher preble, appreciate it. goldman sachs is set to announce more than just earnings, perhaps. more on lloyd blankfein's likely successor. from new york, this is bloomberg. ♪

>> "what'd you miss?" all eyes are on wall street earnings. goldman sachs is slated to report tomorrow before the open. joining us to help crunch the numbers, allison williams. hello. what are we looking for tomorrow? >> we are looking for a pretty

strong quarter after some of the reports we have already seen. trading coming in better than expected. so, while the stock has been under pressure, with global trade concerns, we are seeing that is helping revenue because a lot of the uncertainty, a lot of the positioning that's been going on. lisa: how much emphasis will there be on the market's online lending platform? le we saw bank of america lend -- leaning heavily on that unit for its profits. what do we expect from goldman? alison: we expect to see relatively rapid growth from that unit buzz up -- unit, but, as a percentage of the whole, it's tiny. goldman sachs has been almost fully committed to the institutional core franchise. that has basically been their customer base.

even the wealth component has generally had an additional focus. this is a deviation from them, going after this consumer unit. they talk about their tech expertise, their risk expertise. this is a different type of risk. but i think -- it talks a little bit about the opportunity out there. julie: speaking a pivotal, i think we have to talk about the succession situation here. as that overshadowed the bank's core business -- has that overshadowed the bank's core business? alison: i think goldman has done a great job in terms of telegraphing this succession and taking the gradual steps towards this over the course of the year. lloyd talking about stepping down at some point in the future -- julie: do you think they have done a good job in terms of being clear? shouldn't they have said, this is what's happening, when it's

happening, how it's happening? instead it has been this drips and drops situation. alison: i think it takes time to make this decision. lloyd has made the comment, it's hard to leave when it's going well, but certainly you can't leave when things are going poorly. from that perspective, that's really why i think the timing makes a lot of sense. we are late cycle, but not yet into the next down cycle. when you think about when lloyd took over, which was around 2006, things were very strong. we were starting to see some of the cracks. hadhe time the cracks started coming through in the first half of 2007, things were already in place. it does make sense that he would to have peoplef, in place at this precarious time, when we are late cycle and people are looking to the next cycle, to hand things off. >> as someone who knows this bank so well, as you look at that transition from a traitor banker, how to a

much do you make of that? banker, but he does have expertise in some pretty interesting businesses. lisa: the music industry. >> he brings that perspective as well. more entertaining music on the conference call. that's where we will be looking for the most excitement. but i do think -- some entertainment. i do think that banking has always been a really solid part of the franchise. they are a leader in the m&a business, not just number one, but double the market share of the next couple of players and that's over a very long pe riod. they've had a very strong banking presence. trading revenue will be a big part of that business. the most important thing for goldman is that it does have a very strong culture.

i would point to banking and m&a doing very well under lloyd blankfein. julie: what does goldman have to do better? alison: there are two mappings investors want to see. one, we've already seen some improvement. there were some structural reasons for that. from an investor standpoint, you can only sit with that for a few quarters, then you want to see some signs of improvement. that's one of the reasons why they said, we think, long-term, we have this one dollar trillion opportunity -- $1 trillion opportunity. the second part of it is the digital. the digital will take even longer. we'll have to see progressive steps. that's a little bit more -- again, it is such a deviation from their history, because we are late in the cycle when they are getting into the business, that's a much bigger question mark, but apollo -- a smaller part of the business. investors are looking for huge

gains over a week quarter a year ago -- weak quarter a year ago. the expectations are even higher. lisa: you have a busy couple days ahead of you. thank you so much, alison williams, working hard over the next few days. coming up, christmas in july for amazon shoppers. just how much ceo jeff bezos has to celebrate. hint, he is very rich. this is bloomberg. ♪

>> "what'd you miss?" christmas in july for discount shoppers if you can get on the website. amazon suffered an outage at the kickoff of prime day, the deals and steals sprint. the website is now back and -- back up and running.

bloomberg news big-box retail reporter matthew boyle is here with more. that's quite a title. prime day was a big thing for amazon. now it has become a big deal for everybody else. >> it really has. why not draft off that traffic? four out of 10 shoppers have said they will be shopping somewhere else today, and i think it's going to be even more if you got the fail dog message. if you went on at 3:00 eastern and you weren't able to buy what you wanted to buy -- i'm looking for some new xbox speakers for my son. he keeps breaking them. maybe you go to walmart instead. lisa: people have a need to buy things because today has been designated as prime day. >> nothing was going on. let's invent a holiday. th us you have prime day --

us, you have prime day. it's also to get more prime members. let's remember what this is all about. according to one survey i saw, only 14% of people were not currently in the prime program plan to join up to prime, so that's not a great number for jeff bezos. he wants more people to be saying -- but he has all the low hanging fruit for prime members. now it will be a lot tougher to convince people to pay that $119. lisa: i've been surprised how little i've heard about prime day in contrast to the past couple years. disclosure, i'm a prime member. i have not gotten many, if any emails about it or pushes towards it. >> it's this weird mix where they want to keep it veiled in secrecy so you don't know when exactly it's starting. we are talking about it right now. lisa: we are giving free advertising. thehen you invent an event, promotion around that event and your strategy around promoting

will always be a bit debatable. maybe what worked last year, you won't do it again. you want to tweak things. lisa: lest anybody be concerned there hasn't been enough advertising, let's talk about how rich jeff bezos is. he is now the richest person in modern history, $150 billion. >> maybe a little less now in post market trading. amazon is down 1%. lisa: i'm crying for him. >> he is still doing ok. what struck me is that his net worth is nearly rivaling the walton family now. talk about a retail empire. it is right up there. >> courtesy of the bloomberg billionaires index, they break it down in so many interesting ways. $52 billion ahead of his nearest rival. that's an ambani. he is a full highly ranked billionaire ahead of everybody

else. how has he been able to do that? the ascent has been so rapid the last couple years. >> by finally delivering profits for amazon. taking $.50 of every dollar that is spent on the web these days. creating these events that get us jumping up and down about what's basically a chance to get rid of a lot of inventory. >> what's his next trick? >> we know he is looking into other areas. we know they are getting active in health care, for example. i think he should not take his eye off walmart. walmart is doing quite well online these days, so he can't forget his traditional rivals. julie: there is something that struck me as we talked about amazon. we talked about netflix earlier today and tesla. people put inpe these particular companies. i was looking at the valuation of netflix versus some of its competitors. amazon, the valuation is even higher than that of netflix.

just reflecting the forward-looking hopes forecast, whatever you want to call them, for these two companies in particular. thanks to matthew boyle. >> coming up, what you need to know for tomorrow's trading day. this is bloomberg. ♪

julie: "what'd you miss?" it could be the worst reaction to netflix earnings since its second-quarter of 2016. that report as we saw subscribers missed estimates and some air perhaps coming out of what rob arnott would call the netflix bubble. >> so many bubbles. julie: netflix and tesla. don't miss this, fed shared -- chair jerome powell delivers his annual report. >> looking at goldman sachs as it reports second quarter numbers before the bell. lisa: johnson & johnson reporting second-quarter earnings before the bell. julie: that's all for "what'd you miss?" >> this is bloomberg. ♪ ♪ phones have made our lives effortless.

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emily: i am emily chang in san francisco and is is "bloomberg technology." over 5 millionst subscribers. well over expectations. does it mark the end of an era. amazon crashes on prime day. andthe 36 hour extravaganza $3.4 billion in possible earnings. we spe