media giant has removed 32 pages and accounts from facebook and instagram, believed to be connected to an authentic political activity ahead of november's midterms. the company has been working -- working with the fbi to investigate the activity and who is does not yet know behind these particular accounts. in the meantime, homeland says todaycretary that u.s. spy agencies were right that russian interference in the 2016 u.s. presidential election. there were remarks at the cybersecurity summit in new york. secretary nielsen said, it was the russians and added that any attempt to interfere in our elections is a direct attack our democracy. america will not tolerate this meddling. has given chief of staff john kelly a vote of confidence or bloomberg has learned the president has asked kelly to stay through the 2020 elections. firstt celebrated his

full year as chief of staff and for months says that has speculation that kelly might leave. the highest american at the vatican insisted today he never knew or even suspected that his former boss reportedly sexually abused boys and adults. the cardinal ahead of the vatican's family office's book past church hierarchies come under fire following allegations of sexual misconduct of the x cardinal who consecrated as a bishop. >> at no time did any person ever from new jersey or from new york ever speak to me. as a matter of fact, i didn't hear a word about any of this. that might be hard for someone

to believe but if that is the only thing on your mind, then you focus on that. mark: the associated press in the conservative catholic magazine, first things, catholics were urged to withhold donations to the u.s. church until an independent investigation determines which u.s. bishops knew about the alleged misconduct. global news 24 hours a day on air and on tick tock on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. ♪ >> live from bloomberg world in new york, i'm

julie hyman. scarlet: i am scarlet fu. joe: i am joe weisenthal p julie: stocks are higher on speculations that trays -- trade tensions between the u.s. and china may ease. joe: the pressure -- the question is what did you miss? >> investors hope for apple to deliver on earnings and stabilize. is it 2015 all over again? facebook announcing today it identified ongoing efforts in the u.s. midterms. we have the latest. new investor darlings. we will talk to the cofounder of one of the longest running hedge funds in the brave new world of cannabis. according to a bloomberg scoop, china and the u.s. are aiming to restart discussions after a nearly two-month gap. possibly averting a full-blown trade war. this comes as steven mnuchin and the chinese vice premier have held private conversations on a matter ahead of the next wave of tariffs this week. is said to beada

frozen out of negotiations as the u.s. engages with mexico. for more, let's welcome -- from washington. let's tackle the china issue first. it seems right now that these are talks on talks. they are not actual talks, but on whether to research -- restart talks. what to we know about the progress they are making and the potential for actual talks? >> you have perfectly characterized it. they are talks about talks. it looks like the top it's too mnuchin and in china, there is a flurry of contact between the two sides on setting up talks wheren the principles on the u.s. china economic relationship could head to next. in the mists of all of these tariffs being lot that each other. but it is really unclear, if mnuchin is the most moderate voice in the administration right now, it makes sense that

china would turn to the treasury department. the treasury secretary for many years has dan -- has been the point person. but the ultimate word, as we have seen from this administration and covering it is that the president has the final say. the president thinks that now is the time when he is referring to his art of the deal, to finally anddown at the table jumpstart negotiations. it will happen. us, and hey clear to said this over and over again, the china has to bring , policy changeas initiatives, before there is even a chance that the two sides could actually be at the same table. joe: is there a believe anything has changed from the chinese perspective? we have seen market selloff and data that is iffy. they have talked about having to stimulate the economy.

any sort of perception out there that maybe what we have seen so far in the trade threats has put china in more of a position to make concessions? >> it is really hard to say. tolooks like the rhetoric media is showing their focused more on growth, something the trump administration would like to hear. there has been a lot of talk and tweets from trump and the administration on how the chinese -- is heading and how it may or may not be being managed right now, talking to outside experts, it is being manipulated right now. a lot of new wants to something like that. knowing, it has been a verbal warning, watching you, it may be pushing china to come to the negotiating table. it may just be there is nothing substantive written down on paper, but this is a way to sort of force their hand. saying if you want to talk, it

has been this long, it is time to bring something to the negotiating table that we would like to see. >> and who the principles are makes all the difference in the world given that wilbur ross, steve mnuchin, jared kushner, do not necessarily see i to eye when it comes to china relations. of's talk about the center what might be new talks now thaten the u.s. and mexico do not include canada. >> right now, it looks like canada is being frozen out. we have heard subtle comments that trump would be ok with a separate deal with mexico and a separate deal with canada. it could be that they have a new government and it may be the time to build new bridges and relay some groundworkgornment. it is not clear whether right now we are moving toward separate deals or a single deal for both neighbors. >> good stuff. thank you so much on the latest

bloomberg reporting that indicates there are starting talks when comes to china and the u.s. trade. coming up, back to america, the cofounder discusses investing in the rising u.s. cannabis industry. from new york, this is bloomberg. ♪

julie: results he says for the second quarter were far worse than they could've imagined and that it has been a bull market

to boot. capital funds fell 5.4% in the second quarter according to data on july 31 obtained by bloomberg. reporting on these results from green light, i'm not sure if we have more details on the performance going back further, but a five .4% decline is disappointing for sure. >> to say the least. according to the second quarter it's --it has exited more on the second quarter performance and we will keep you posted with any further developments. american cannabis investors no longer have to look north of the border for opportunities. poseidon asset management is one of the first hedge funds to focus on the industry and is grown to more than $65 million under management since 2015 withholdings only in the u.s. a cofounder and managing director joins us now from san francisco. the -- great to speak with you. you focus a lot on companies that have not yet gone public but if you were to look at just the performer -- performance of

stocks focused on cannabis in canada in the u.s., it does appear as if investors are more comfortable with investing the sector. clearly theone administration as opposed to it under attorney general jeff sessions? >> thank you for having me on. it is very interesting. very early with investors up in asada as well, it is prolific as it is today and did fantastically well. the reason we had been rotating back to the u.s. is we see quite a valuation discrepancy. when you look at the total market of the united states, investors are looking for growth, so, when you look at the we have at, yes, challenge federal situation we're all trying to work to resolve. we believe we have a couple more years but investors do not want to wait longer. are getting positions established especially after they have seen what is happened. how do you evaluate, whether we are talking about a private

company, who will take advantage of this. as you say, everyone kind of recognizes the market will be huge. is it just a matter of investing in any one or are there specific aspects you look for the you think -- >> it is a great question. do a lot of research, it is an actively managed market. you cannot just buy the space, you really have to look at different markets the operators are participating in, if they're in a limited license markets like massachusetts, illinois, licensingimited schemes. very interesting from an ester perspective. versus more of an open markets game, if you look at what is happened in oregon, where it has been much more liberal, you see a massive price compression and a harder market to compete in. it is very much specific with the markets, and the actual teams.

it is an early-stage industry and looking out, management teams, quality and depth, that is very important. we have been at this for 4.5 years. officially with this first fund. we have seen a lot of teams come through. the good news is we are maturing and seeing better and better quality talent joining the you look at when some of the drivers coming into this space or interest groups, alcohol certainly comes to mind, the work up in canada, we know those groups are just waiting for a bit more legal framework before they become more ingrained. >> four of the companies in which you are investing, what is the risk that if there is more broad federal legalization, that, a consolation brand or one of the larger evacuation companies comes into this space more aggressively, or are you betting they will come in and

the inquisitive if you see that nationwide legalization? >> yes, so a lot of our focus has been with teams that understand that in traditional access, the landscape will become much more competitive. so you need to have a focus on market share today while it is relatively easy. we are competing against each other in the space, but there is a lot of co-op where we're -- where we are working together because we understand establishing a strong foothold in the united states today, it will pay a lot of dividends down the road. gettingre successful in significant market share, we think the inquisitive nature of some larger enterprises is a natural pathway for a lot of companies. >> anderson what you're saying about the focus on market share, theyor a lot of companies, are not profitable yet. what is the biggest hurdle for profitability for these

companies? >> sure. we recently invested in an operator down in arizona that has significant market share and it is a medical market heading toward a potential legal market in 2020. but their cash flow positive and there are businesses that can be . it is a decision for these companies of, does it make sense to focus on cash flow positive, or is that too much at the limit of growth, so we like to see those who have the means of generating the profit but are choosing not to for market share. that is how we approached canada early on it we focused on low-cost producers that were one of the first to be profitable and we're looking at those here in this -- in the states. joe: it is all about producers or are there shovel makers out there for the industry that you find promising? >> one of the earliest focuses of ours has been to take some shovels. we have done a lot of work in

the tech space, data, consumer engagements, human capital. that very essential tools the large-scale emerging enterprise-level operators need that just did not exist before because traditional tech or payroll companies will not serve in this space so it creates a larger opportunity for ground up technologies to service the industry. we see that within the candidates stays but then longer-term as we reach a more these landscape, technologies are applicable to other highly regulated industries. >> all right. good stuff. thank you for joining us from san francisco. it is now time for the stock of the hour. semi-cap equipment company is soaring because shares for one of the top performers in the s&p 500 are actually on pace for of best day since october

2015. abigail is here with more. the factinteresting on that it is not a huge feat. revenues by 2%, to have is kind out.reaction stands it is not a chip company. they do the monitoring and the testing. it is actually a leading tell because they have manufacturers for investors, if they want suppliers, if chip companies or manufacturers of chip, if the demand is strong for their product, it suggests there demand for the chip themselves are actually pretty strong. joe: one of the interesting things about the market is ships have held up well even while the other areas haven't. >> you are right about that. it is interesting that we have the strength of the chips. the big story has been the tech -- if we take a look at this chart, it is five-day, and really

interesting. what we will see in blue is the chip index with the stock up 1.6% and in yellow, the s&p 500 tech index down 3.6% and take a look. we really have the outperformance and even though the beach was not huge and the guidance was not that up the heat, not like this huge thing, perhaps investors are tracked to the fact that in this particularly difficult time for technology, the company has done quite well. strong looking forward but intel are starting to onhaps look at crowds horizon, and perhaps some investors are seeing this as a bright spot. you so much, abigail doolittle with the latest. you can see big new -- big moves for a lot of these companies. up by almost 80%. on to the bloomberg scoop or u.s. and mexico in the final stages of negotiating a deal on rural cars sold under

nafta according to five people familiar with the talks. we want to bring in randy with the latest. how long have the talks gone on? how close are we when we say they're close to some kind of a deal? foralks have been going on a most a year, they started in august 2017. trump has said we are close to a deal but we have heard that before when talks started, they did not expect them to last longer than that calendar year. they continued to extend the deadline. there are reports that we are close now, but it still remains to be seen whether they are at a deal. >> i'm a little confused. what does it mean for the u.s. and mexico to be near a deal on cars when nafta is a trade agreement with free parties? >> it is a little confusing but trump has long said he prefers to negotiate deals on a

bilateral basis. he thinks it is easier and faster. we have lately seen the u.s. has gotten closer to mexico and they are trying to push them to come to an agreement soon. the idea is once they get mexico on board, then it will be easier to convince canada to sign on to an agreement. >> president has indicated that he finds some sort of, some level of comfort, with the incoming mexican president. is the fact that the u.s. and after maybe coming together any ethic of a function of that or just pure economics? >> i think a personal relationship has helped. i think the president has sent negotiators to talk to the united states. hasn't entered office until december and has signaled that he wants this in place before the office. would give them basically an initial deal and three months

to get it signed. hopefully, according to the suit -- to the two sides, it doesn't happen so he enters office. >> thank you. i have been speaking with randy woods on the news of that scoop, set to be nearing a deal. specifically, how cars are treated and made in the u.s. versus mexico and we will continue to keep you posted. time now for the deep dive. we have cut apple getting ready 30report earnings is about minutes. this is what investors expect from the company. likely increased 15%, $2.4 billion, that would make it the strongest june quarter since 2015, and apple sold 21.6 million iphones at an average selling price of $699 thanks to more expensive iphone x. apple spanning a lot of time building up other products and services with higher margins.

its moneymaker remains the iphone. take a look at the chart which shows revenue growth in the iphone specifically is expected to increase 15%. there is the yellow bar, building on the last two quarter gains. clearly, 2016 over here was not a good year for iphone revenue because it came off really difficult comparisons following a stellar 2015. apple seems to every gained some momentum here. the stock price will be contingent or hinge on whether company says regarding its forecast for the next quarter, the current quarter. be able tople will tell whether it will unleash the orest iphone is in september october or november. >> i will stick with apple and talk about the $1 trillion valuation that some people have been talking about for some company. bloomberg took the estimates from analysts, the 12 month average price target, for apple

as well as for other companies, and extrapolated what the estimated market cap will look like as a result here and on that basis, amazon actually would be quicker to reach a $1 trillion market cap than applewood. apple would. if the estimates are correct and they do not change, you could see the spirit $1 trillion, we like to talk about it. it is a big number. does it have concrete significance? probably not but it is a good marker for sentiment. >> $1 trillion is a lot of money. >> apple is closer than amazon, clearly. a 940 million dollar company and amazon is an $800 million company? so it takes an extraordinary amount of growth from amazon to make it happen. >> we have already seen quite a bit. joe: let's talk a little bit of eco-. we have the latest consumer confidence data.

breakdowning at the by age and noticed something interesting. if we go to my terminal, you can see the blue line, confidence of people under 35. that is shooting up with young people feeling good now. the white line is people over 55. that is holding that he nice week. as high but doing good. tois the 35-year-olds 54-year-olds, people the middle, and that is sliding. that is at the lowest level. it is sort of like the consumer confidence smile. two ends, it is going up and in the middle, going down. we are not talking about horrible number here but it is interesting to see the divergence. people have family worries. they might even describe the people right now in this category. big expenses are coming up.

>> it is funny because you could argue that young people tend to be more hopeful. ontory does not bear it out that chart. they are not always the most hopeful by that consumer confidence metric it something else is going on. >> it will be interesting to watch. >> we are looking to the markets as we anticipate apple's results, due in about 30 minutes. we have recovery in stocks. the nasdaq up .1% -- .5%. the s&p 500 up as well, the dow rebound in 105 points. on interesting perspective apple from loup ventures, gene munster said unlike some of the other tech heavyweights, big disappointments, when it comes to apple, investors are getting more comfortable with steady as she goes. >> are you calling this a boring company? >> maybe the bar is not quite a sight. maybe. if you look at the function on the bloomberg, apple has consistently surprised on the

bottom line but that does not necessarily mean investors are rewarded because it is all about the forecast. will keep you posted with apple coming up in 30 minutes. this is bloomberg. ♪

[applause] julie: "what'd you miss?" stocks down as we see a bit of a

report -- recovery on technology. tuning in live on twitter, welcome to the closing bell coverage every weekday from 4 p.m. to 5 p.m. eastern. scarlet: we begin with the market minutes, we saw a lot of strength in the industrial sector today. you don't necessarily see that thehe outperformance of doubt. within the s&p, that was the best-performing sector along with real estate and health care on the session. , but not byover looking at the s&p group which 831%. at earnings continue to drive the narrative when you look at individual movers. around andced recovered by session and. the company raised its full-year earnings outlook -- session and. the company -- session end.

the company raised its full-year earnings outlook. pfizer shares are finishing higher on the day. that's why about three and a half percent. the dna sequencing, genetic testing company is coming out with its numbers as well. the company's results in the words of an analyst, are trouncing expectations despite consensus. that stock is up in the most in the s&p. holdings and blue orca capital announcing it as a new short today. fell 37%. i spoke with them earlier on bloomberg and among other reasoning key dug into some of the leased buildings in china, a data center company and found maybe some of the company's numbers were not matching what was happening on the ground

there. at least, that is what he is alleging. chipotle mexican grill experiencing its first sickness in quite a while. they reported sickness at one of its restaurants. this one was in ohio. the company says it has reopened the restaurant in ohio temporary closed after customers reported getting sick. the stock remains lower by almost 7%. joe: let's take a look at the government bond market starting two-year and 10 year yield. continuingr yield is up and the 10 year yield is donald little bit. overall, not a huge day or the u.s.. later in the week with the fed decision and job report, maybe more fireworks. more fireworks in japan. the government adjusting some of its tweak to its monetary policy framework. long-term rates shot up in recent days.

coming back, the bank of japan does not plan to make any major moves that would let rates shoot up in the 30 year yield. julie: i quickly wanted to mention earnings from pandora. the company had a second-quarter loss that was a bit narrower than estimates. $.17 wasare loss and what analysts had anticipated. in after-hours session, pandora's shares are getting a lift. it is not as narrower than estimated, but also narrowing from a year earlier. scarlet: let's get to currencies. the dollar is firmer before the decision tomorrow. the meeting began today, but there is no rate hike expected. it is expected to be humdrum. if you look at the dollar-yen, the yen is at the weakest for more than one week versus the dollar.

the boj did not do anything with its policy, but made some tweaks allowing greater movement in yields and inflation or tax. the end is weaker against all major currencies including the euro. we wanted to show the euro because it had earlier gains after the ims gave a downbeat assessment of the economy. the country is getting ready to exit its bailout program that month in august. the pound is slipping a hair before the boe meeting on thursday where they are expected to raise interest rates. a quick check of the north american currencies. from bloomberg, u.s. and mexico are in the final .alks of negotiating canada is not part of the discussions. the peso is weaker in the loonie is stronger. we are not seeing much of a reaction to the headlines yet. joe: let's take a look at commodities. oil is one of the biggest losers today.

supply concerns on oil is down 2%. kind of a rough month for oil. the worst month since 2016. keep an eye on that. gold is not doing anything, and .oybeans continuing to pick up it has become this bellwether for how people perceive trade to be going. that's because of the impact on u.s. farmers. maybe today, a little optimism. soybeans are up 3.1%. those are today's market minutes . scarlet: let's bring in peter who is a chief market strategist at fitzgerald. we went to get your take on earning season given we are waiting for apple and we have seen so much of a violent reaction to a lot of the big tech names. what is it to you about the fact we have this rotation coming out of tech and into the industrials? is the all earnings linked or what is likely to happen? peter: i think it is the latter.

there is a bit of an over block condition in technology for some time. women's concerned -- we have been concerned for the very reason that it was most crowded trade. anybody was an. ofaccounted for about, as july 20th, 70% of the gains in the s&p 500. that has changed. july 31, we are up 55% and that's a lot because of facebook being up. were a little overbought in our view. valuations were quite high. sentiment and animal spirits were driving those names because everyone wanted growth. when things are good, they want growth. not value. we are starting to see the rotation back into commodities and mining. we are not sure that rotation will last. that is one of the reasons we are little less constructive broadly on the markets than we

were at the beginning of the year. just to illustrate that, i have a four day, session chart for the sector breakdown. recent tech selloff, three days until today, you the tech index down 5%. where is that money going echo telecom service, although that is only three stocks. looking more defensive to some , there is an ongoing debate on whether the broad market can go up without large-cap technology. i think we of her differing opinions on that front. what do you think? peter: i think it will be difficult. the rotation into value usually does not occur until there has thanmuch more of a crisis the has been thus far. even though they account for less of the appreciation in the s&p than they did just two weeks ago, they still performed very well year to date.

that rotation into value does not come until people say oh my goodness, maybe there is a problem with the growth story and we need to be concerned about multiples on cash flow rather than revenue. investor sentiments are focused on multiples of revenue and the story rather than valuation. i think that is still intact. joe: what about portfolio strategy? .articularly bond exposure interest rates are still not that high and the bank of japan is causing ripples around the world. on the other hand, credit prentice -- credit spread is tight. where are the opportunities? peter: they are few and far between, frankly, from a value standpoint. the rates markets are very interesting right now. we talk a little bit earlier about japan and providing

another extra 10 basis points of headroom on the 10 year. the question is, is that much to do about nothing or is it potentially the straw that will break the camel's back? the unfortunate part of the story is that risk markets are sensitive to rates right now. have reallythe boj helped anchor our long end. even though -- i say that because if you look at relative value globally, it is the u.s., japan and germany. are low in germany and in japan, they tend to stay lower here in the u.s. on the long end. there is an anchoring effect on a relative about -- relative basis. even though the ecb and boj are active, we see the housing market start to react here in the u.s.. mortgage volumes, residential mortgage volumes have begun to fall. that is one concern i have.

the opportunity there may not be on the long side. it is starting to evolve more on the short side, more on the mindset of sell the rally rather than by. julie: isn't that just combined to perhaps the homebuilders and all of the consumer discretionary? peter: we are concerned about consumer discretionary in the homebuilders are tricky because it has attribute -- tricky composition. a tactical rally in homebuilders would not be surprising. longer-term, more fundamentally, we are more concerned because we have a propriety affordability container. housing is unaffordable to the average person for the first time in a long time. peter, thank you so much. julie: apple is not the only

game in town. we are seeing earning results from various companies. from new york. this is bloomberg. ♪ erg. ♪

mark: i'm mark crumpton with first word news. five people familiar with the talks tell bloomberg news the united states and mexico are in the final stages of negotiating a deal for rules for cars sold under nafta. that has been one of the biggest sticking point in discussions to overhaul the north american free trade agreement. the two sides have exchanged new proposals for the auto industry and mexico's economy minister is scheduled to travel to washington thursday for meetings with robert lighthizer. the top fbi official in nevada

says the agency is wrapping up a report about last year's mass shooting on the big strip, and that it won't be released until after the attacks one year anniversary -- attack's when your anniversary. while a report may not be able to pinpoint a motive, it will focus on what made the attack possible and new preventive measures for the future. the french president's twornment survived no-confidence votes in the wake of a political and public uproar triggered by a video of his chief bodyguard beating up protesters. sinceave been under fire france's newspaper has identified the person captured on camera wearing a police helmet and striking a young man at a mayday protest. for the first time, a hindu has been elected to a general seat in pakistan's parliament. esh plans tomah

address poverty and women's rights issues after taking his place in the national assembly. the latest minorities have long faced discrimination in pakistan. the conservative country was a pseudo-majority -- sunni sudi majority. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton. this is first word news. -- this is bloomberg. julie: "what'd you miss?" apple is not the only major company reporting earnings today. we have already heard from a number of them including procter & gamble and ralph lauren's. the list is long. down is romaine bostick and lee drug in. romaine, in two seconds, do all of those. no, just kidding. [laughter]

julie: give us the latest scorecard on how we have seen the earnings season go. romaine: so far we have done well. of the s&pst 300 companies report. almostend of this week, 400 have reported. we have gotten a clear picture of what is happening. 85% beachan 84 or rate. where investors are paying most attention is to the forecast and wanting to know how these companies are planning or dealing with some of the trade and economic issues out there. grogan, yough compiled by side estimates. how to those estimates differ from the beach rates? -- beach rates? analysts are to contribute to our platform. 79% of our consensus numbers

argan of the above the street. that goes with the fact that the street is almost always below what the companies report. you get the normalized expectation there. what we look for is on the normal quarter basis, they will take their estimates down in the reports so companies can hop over them. when we see our estimates rising in the prince, that gets interesting and we normally see stocks follow the rising estimate. we did see that this quarter. is wheninteresting also estimates are way above, that is a red flag and that means the stock is big. in the reports, we saw facebook numbers were way above the street and they fell apart. shop if i is a good example today. our numbers were way above the street and a slightly beat our numbers. the stock fell apart. it was already big. joe: romaine, an important company that reported was png. they are very exposed to a

general economy and changing the nature of a consumer, commodities, and they are building to pass up and prices. what did we learn from them? romaine: if you have a beat on the top line and beat on the bottom line, investors were not buying it. it was fluctuating all day and they are struggling with added raw materials costs. then, there's the general issues of some of the consumer staples companies and the intense competition. ,ou have amazon, kroger basically anyone that has the wherewithal to come up with their own store or private brand as you call it is doing it. that's because it is profitable to them and gets more people into the stores. that's hurting the branded companies like png. they are struggling with this. we know all the drama with nelson peltz and it will be interesting to see over the next few weeks now that we have seen how the company performs.

, softbankort today invests $240 million in a company which is just a bunch of household goods without a brand. it is a brand but it's called brand lists. -- brandless. scarlet: if you translate it, it means without brand. joe: i did not know that. what is the price of all those things? organic peter butter is three dollars versus told dollars. julie: i think everything is three dollars. joe: oh, everything? julie: i will have to go back but i have seen a lot of things at three dollars. scarlet: romaine bostick, thank you and saying with us more is estimize founder leigh drogen. this is bloomberg. ♪ ♪

scarlet: "what'd you miss?" we are awaiting apple "what'd you miss?" ford's fiscal results after the bell in about nine minutes from now. investors hope a beat will help turn the tech sector around. back with us is leigh drogen founder and ceo of estimize. we were talking about how apple seems to be a more warring tech company than other names. joe: it is only the biggest company in the world. scarlet: it is and it is a phone company and the other services are kind of small compared to the iphone itself. what is the most interesting thing you notice about estimates coming in from apple? leigh: we are to see a smaller range of estimates than we used to. the scenario where you get an upside or downside surprise, everyone kind of understands this part of the cycle. especially for the iphone. we don't have a new phone coming , that will be a couple

quarters from now. we are seeing larger dispersions and that is interesting. what we find is our options trading kind using the dispersion and estimates. when the dispersion is greater than the previous quarters, you want to buy volume going into the rp and celibate is lower. -- it'sagreement of how a measure of how much people are in agreement. it can be interesting. julie: what about the set of you were just talking about about the gaps between estimize and wall street? we have seen estimize way above and that caused them disappointment in the stock. leigh: we are pretty close on apple. iphones whichat is interesting, we are at a 42.5 -- 42.52 on eps here

million. on eps here you can see the numbers. we're pretty gross -- close to the street. joe: i remember you talking about amazon and you said earnings are what drive amazon. what is it with apple? sales orings or unit what have you found is most correlated with how apple will do? leigh: apple is interesting because it changes depending on the cycle you are in. and the down cycle it is gross margins. power do theyng have, are they doing well with their supplier relationships and are there commodity cost risings. at the top of the cycle, it is by phone sales and they hit the targets on what this product -- was this product really good and does that speak to their ability to sell things in the future. scarlet: how does a company like that make it so the cycle is more even? the fiscal third-quarter is usually the most boring quarter because everyone is waiting for the new iphone releases coming second -- humming sometime next

quarter. how does apple change that max? leigh: the trade at all times earnings and there is a reason because i will think people are really valuing the services, business, that highly. even though it is growing quickly, apple is a company that, at any moment here, they can slip up and have a bad product cycle. if they have one bad product tole and people defect android in mass, it will be really hard for them to grab it back. thinking about that with some of the other tech companies. we know facebook's core is slowing and instagram is bailing it's out -- it out. aws is overriding any slowdown in that's. should that worry and apple investor that they have other things that could bailout the core business?

leigh: it is already trading at the discount that people are taking that into. i think that conversation about facebook is, twitter, and others is really important right now. the whole valuation concept for facebook is built around, do they have a motive. dial askingning the if they can throw more ads in front of people's faces but they are not really grabbing five bellevue -- high-value people anymore. although enterprise tech names that have been so bought are definitely trading at high valuations. i think what happened is they got super spooked by what is -- what happened to facebook. there is serious cracks in the facebook armor here. people need to think about what the mode actually looks like.

then we can see how the stock will behave right now. julie: back to apple for a moment. if the idea is a don't slip up they will be ok, that is not very exciting, is it? flipside, is there any opportunity to delight and surprise people in the way that they once did? leigh: they are hardware company so every cycle will be at risk for them. , googley for example comes out with a great ai, they are not there yet but the assistant goes into the android operating system and apple slips up on the hardware for one cycle and everybody switches over to that android operating system. apple is so far behind on ai that they will never catch up after that. scarlet: leigh drogen ceo and founder of estimize will stick with us as we get ready for numbers due to come out in 20 half minutes -- two and a half minutes. this is bloomberg. ♪

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scarlet: "what'd you miss?" "what'd you miss?" apple just reported results and let's get to it. the fiscal third-quarter eps beats the highest analyst estimates out there which was two dollars and 24 -- $2.24. the consensus estimate was for $2.18. the revenue number was also higher than expected. $53.3 billion. analysts were looking at 53 billion.53.2 fourth-quarter revenue was anywhere from 60 to $62 billion for the fiscal fourth quarter. analysts were looking for 59.3 7 59.37n -- 57 point --

billion. sold: third quarter units 31.4 million. one would have to think that if they're beating on the bottom and the top line that they made it up somewhere whether it is from the services business, we will look for the breakdown in that. or, if it is the average selling price and we're not gotten that headline. joe: speaking of services billion.9.45 i believe that is a little more than what has been expected. the services revenue is expected to come in at 9.2 billion. that may be helping. julie: that is better than some estimates i've seen. bank of america saw 25% growth in services. morgan service -- morgan stanley had also seen growth. scarlet: apple makes a point to say revenue reaches a new

all-time high, although it is a small base compared to some of the other parts of the business. iphone is nearly 30 billion and services 9.5 billion. scarlet: the goal here for apple is to get services to $50 billion by 2020. i think that is one thing tim cook has laid out to be the overarching mission of the company. we will continue to look through this and see if there is anything on china. i doubt it will be mentioned in the press release aside from the fact that revenue was $9.5 billion for the quarter. lots of questions on the conference call later on about what china trade tensions will meet for company that does so much business in assembly and so much of its parts assembly, maybe parts of manufacturing as well. looking through some of the other numbers as well, apple shares are gaining in the post-market. they gained about 3%. a lot of it is hinging on the fourth-quarter outlook. let's bring in leigh drogen, the fountains -- founder and ceo of

estimize. quarter, 60 toe 62 billion dollars of revenue, can you read into that in terms of what apple is thinking and planning on when it comes to the release of the next iphone cycle? leigh: it is basically right in line with numbers. it is a little bit above the estimized consensus. as i said before, the best thing here is the gross margins guidance number. that is where i think people will get worried at the bottom of the cycle. it looks pretty good. joe: john butler of bloomberg intelligence, what stands out to you? i'm relieved to see a decent services number. that is high profit revenue. if they continue to grow it at this rate, any beat the target that scarlet was talking about, the 50 billion by 2020. to me, that is the most important number here next to china sales. julie: how are they going to

expand that services number? justher words, is it existing services and a question of signing more people up? or, is it a question of offering more services? sales --ut a third a third of sales in the app store are gains. they recognize the importance -- games. they recognize the importance of the importance of showcasing top-selling apps. the app store is about one third of revenue. that is the real growth driver. i think those continued enhancements will be good. grow: i think that will incredibly quickly, probably faster than people expect. that is ae say well higher gross margin business the us the multiple should be higher as the mix of revenue changes, i don't buy it because all of the service revenue is dependent on people using the hardware. if the hardware goes, the

service revenue goes. scarlet: it's not like you can have an android from -- phone and use the apple services. is apple's ecosystem in jeopardy in any way? tell the is hard to sentiments from everyone else. personally, i would not switch over to andrew for anything from my apple ecosystem or anything. unless, there was a really home run ai product out there. that is coming eventually. the question is who gets to it when and how. joe: john, the average iphone selling price is a pretty substantial beat. what is that say to you about demand? john: the number skews of the market. the number of models on iphone larger. year ago is i believe it is eight versus five. moretells me it is skewing toward the high-end so they're

probably doing a good job selling the eight and 10. the tenant particular price up a thousand dollars and is driving the asp up. i think it is really helped them to do what i call product line extensions within the iphone family. i think they should continue to do that. they have done it in the ipad family and it has worked well for them there. julie: how much of the pressure on for september then? h was saying this to leig earlier. this is a company that used to come out and surprise and delight. the product introductions every year are feeling a little more -- and the bar is higher because they do strategic leaks. what does the pressure look like this time around to get people to upgrade? john: two points. the while factor in the past had to do with the hardware

innovations were pretty significant at that time. that hardware innovation cycle now is done. all the innovation is happening under the hood in the phone. also to a larger degree with some of the software and apps. the ai that leigh was talking about. to me, apple made a big change with the iphone x. -- it was a design chain. they took away the vessels and taking away portes slowly over time. what will be interesting to see in september is how those new phones look and how much they onk like the iphone x based -- also on how they are price. scarlet: john, you mentioned china sales are critical here. china sales were $9.5 billion of revenue for the quarter. year over19% jump year comes to the revenue increase.

japan saw sales increased 7% year-over-year. americas, the 20% increase was the biggest jump out of the geographical regions. japan at 7%, that is a market that has seen slower sales. it is seeing increased revenue and all of its five major segments, i suppose that is good news even with a lineup that does not always surprise and delay. it will continue to pile their money into the apple ecosystem. leigh, when you look at what the company does with its other hardware, is that -- does that matter? seen those numbers move sentiment quite a bit. in previous reports up socially -- in previous reports, especially around the ipad. it becomes less important as the services revenue takes a bigger chunk on logos to the bottom line unless the gross margins for the products get out of hand. it does not seem like that is taken place -- taking place.

julie: the other products segment including things like that so much the ipads but the , theods, beat headphones apple watches in there and they called wearables is a strong segments. that was up 37% to 3.7 billion. indicatewth rate would there is still demand for that. when you see commentary on wearables from the company. -- company, you want to keep an eye on garman and fitbit to see if there is any pressure on those companies. you wonder what steve jobs would say when it comes to apple's revenue these days. joe: what do you mean? leigh: he notoriously came back and said/everything. he wanted to focus on one main thing because the one main thing did not do well.

are we in a situation where there is a mad -- menagerie of things in the revenue? a lot of things are working because of the ecosystem. if the ecosystem ever goes, how did other things play through? julie: there have been little problems over the year. things that they were forced to upgrade. you have had very's bumps. it looks like we are at full penetration of what the total potential sales of the top of each of the cycles are. taking a look at the top of this coming cycle when we expect new toone models out and it all come through, we are seeing something like 76 million. lester was 77 million. i think we are at full penetration for the top of the cycle. butler: bloomberg's john

of bloomberg intelligence, thank you for joining us. and, leigh drogen, ceo and , you will betimize sticking with us. this is bloomberg. ♪ is bloomberg. ♪

scarlet: "what'd you miss?" "what'd you miss?" we are a bite out of apple's earnings. they reported fiscal third-quarter numbers and it was not beat for the fiscal third quarter. higher than the highest analyst estimates out there. revenue increased to 52 -- $53.3 billion. 41.3 million iphones. that was lower than what was expected. beckwith us to break it down is leigh drogen, founder and ceo of estimize, and also with us is

mark gurman who has been running our top live blog on the bloomberg. waiting for the conference call with apple management and uncertain given the press release that indicate service revenue is something they will want to highlight. what will investors want to ask apple about? there's a few things. one is the impending trade war. investors care about what just happened, but they also care about the company's future. they want to know if this is long-term. they want to know if the trade situation with u.s. and china will affect apple. they're not had a chance to ask the ceo of apple yet. now we know more from the genocide in the u.s. side. i think that will be where a few of the questions from analysts come from. back to investors, they will want to know how the iphone is going to fair.

there was talk about iphone x being priced to high last quarter. that clearly was not true. asp jumped what the five dollars a unit higher than analyst expectations. that is interesting to investors as well. joe: mark, we have been talking about iphones and services. the about ipads indymac and -- ipads and mac? mark: it seems healthier then it was a year ago. we saw this quarter reported 1% year-over-year growth. a 5% dip on revenue. that is not bad news because during the last quarter last new ipadle rolled out pros. there are no new ones this year. those will come around september and october. the mac is a massive disappointment for this quarter. 3.7 million units around that. that is the lowest since the third quarter of 2010.

that is eight years ago. since been eight years apple has sold so few macs. it looks like they will eventually go the way of the ipod, but that is a big concerning. they are not released any new macs until post. we will see if they have more in store which could rebound to run the 405 million range they have sat in the last several years. tariffi think the conversation is interesting because i've not heard anything about tariffs. we've heard a lot about tariffs when it comes to consumer p&g,cals, stuff like anything consumer staples. i think the reason the market has not gotten spooked by that with apple is that it is kind of like when you go -- when you all the bank $10,000, the bank owes you, but when you of the bank $1 billion, the bank owns you.

a very directing consumers have to buy -- it is a very directing the consumers have to buy. scarlet: when we talk about trade tensions, some companies can shift very quickly to say bangladesh or sri lanka to produce what they need to sell. can a company like apple shift gears and move some of the production to another country or is china the only place i can produce the kind the parts that they need at the scale they need? mark: in a word, yes. apple has more money than anyone and they can definitely shift gears if necessary. it would just increase the costs on the consumer and/or there and for a little bit. like the other guest said, i think they will shake this out pretty quickly. i think it will work out ok for them in the end but it is a potential headwind that people are paying close attention to. i'm looking forward to see what the apple ceo or cfo has to say about this. taken ae sort of not

position about it or said they will be affected or noneffective. the reality is, this pending trade war requires two parties, the u.s. is involved in china is involved. apple is a u.s. based company. the majority of the goods in china. that means they will be affected by one side. clearan't be completely by both sides. they will get hit on china or u.s.. it is to be seen which it will be and how they wiggle their way out. i think they will easily. julie: on the sides question, amazon did not think to express concern over the trade question. maybe when you get to a certain scale it becomes less important. in the case of apple, it has dropped in china for those relied on the company. leigh, i want to ask you about the stock. in the case of apple, it has added this is the last chance for their stock.

apple is up, is everything ok? leigh: i don't think it will have an impact on the nasdaq. i think it will have an impact on the overall market because it is such a big part of overall market eps. tech, i thinkto books are feeling the contagion from facebook. a lot of people got smacked really good the other day. i do not think this will have an impact in one direction or another for tact. overall, it will be a positive to get this out of the way. julie: thank you mark gurman in san francisco and estimize founder and ceo, leigh drogen, right here next to me. facebook has identified an ongoing effort to influence midterm elections. we will have the latest next. this is bloomberg. ♪

julie: with a headline from the wall street journal recording said to build over a $3 million stake in the company and has been talking to management as well. senthird point capital is to have over a $300 million stake in campbell soup. the shares are moving up by percent in the after-hours session. in terms of where that would put it in stakeholders, i will have to dig into the numbers a little bit. they tend to take activist position so we will see in this place. scarlet: what it demands. facebook.'s get to they identify the ongoing efforts to influence u.s. politics on its platform. coo city operation included creating a protest in

washington. wewe destabilize event and will begin informing people who are interested in the event or said they would attend. it is clear whoever set up these accounts went too much greater lengths to of secure true identities than the russian-based internet agency to the run-up to the 2016 presidential election. with the latest is sarah frier following the story. julie: is it too simplistic to say duh in this case? this is something we expected and the company has talked about and the intelligence services have talked about it. is this just more meat on the bones with details on what is going on? >> facebook has been promising ever since it got slammed for disclosing russia's interference too late, it has been promising us it would be on top of this. any instancesfind

of people trying to influence politics and shut them down, not just in the united states, but around the world. they have been touting examples where they have been able to do this in other countries. the company has been asked a lot, recently, has there been anything related to the midterms? can you tell us about that? this is the first time they say yes, this is happening. details are few. we do not know who is behind this. there are some indications of connections to the ira, but we do not know this is russia. these actors went through much greater lengths to try to disguise their identity. joe: is there any reason to think that facebook has gotten better at preventing these in the first place? sarah: part of the problem is that facebook does not get a lot of intel from the u.s. government. they tried to get a lot better at working directly with lawmakers. a settlement call they have thousands of leads to pursue. they have hired a bunch of

people including people who are former law enforcement officials or who had security clearance. this is something they have been investing in in the hundreds of millions or billions. the problem is that the bad actors are getting more sophisticated and doing what they set out to do. facebook is playing whack-a-mole here. there are saying this is a priority in they will have to combat it. the people that are trying to use this strategy on facebook are going to be a step ahead. scarlet: it looks like whoever has done this has infiltrated instagram as well. this is not limited to facebook per se. anyone who says delete facebook and wants to move over to instagram, they might have to think again. sarah: right. facebook can probably figure that out based on whether the accounts are tied it anyway. instagram is different in terms of the impacts.

the stuff that gets shared on instagram is not as likely to go viral. people can still build up every influential accounts there and get lots of followers and have an impact in that way. scarlet: sarah frier, thank you for staying on facebook. coming up, what you need to know for tomorrow's trading day. this is bloomberg. ♪ ♪

scarlet: "what'd you miss?" apple reporting fiscal third-quarter numbers that beat analyst estimates and for the fourth quarter, it is looking for $62 billion in revenue. joe: markets are of 3% and that is not an incredible quarter but very solid. don't miss second-quarter numbers reported by tesla tomorrow. joe: and i look at the fed on latest interest rates. julie: brazil central interest rates take their statements as well. bloomberg tech's next next.oomberg tech" is joe: this is bloomberg. ♪ ♪

emily: i'm emily chang in san francisco. this is bloomberg technology. apple reports earnings that beat expectations and gives an upbeat forecast for the current quarter. all the highlights from the results in the call. detects political interference on its platform ahead of the u.s. midterm elections. what is the social network doing to secure? tech is gearing up for the earnings r