We have seen the ratio of the dow to the nasdaq. The dow has been gaining disproportionately and add a record, approaching 22,000. Movement has to do with earnings sales and if you look at the tally on the bloomberg, we have 315 of the 500 components have now reported and 70 companies have beat analyst sales estimates. About 5. 5 ing at earningswth and 10 growth, so continuing to see gains that are better than estimated. As for some of the highlights to the upside and downside, we have sprint as one of the best performers after the Telecom Company came out with a surprise profit after subscribers dropped. We got the story in the loss bash in the last hour that softbank might be interested in looking at dish network. That could be a potential murder potential merger target. On the flipside, we have under slashinghat company its forecast for the second half of the year. That was broadly expect it. Also protest also projecting weaker gross margins. Mosaic is forecasting a tighter margin, saying it sees higher ammonia cost. Those shares down as well. And the big report after the bell will be apple. Although most of the focus will be on what happens with the iphone eight, we are seeing some focus on the mix of revenue in the last order between product, services and Software Come of those shares up going into that big report. Julia thank you very much. Look at cmen we group, one of the companies that reported before the bell, shares are rising as they put Second Quarter profit that beat analysts estimates and posted a dailyrease in average volume. But revenue for the quarters was in the lowest estimate. Joining us to discuss the results is the chairman and ceo of cme group. Thank you for joining us. Guest thank you for having me. Scarlet for the quarter that ended, revenue did rise 2 with market data fees and other revenue dropping from a year earlier. Talk about the market data business and give us an idea of whats keeping the business from growing. Guest you have to remember that market a to revenue is something we just started charting forward in the last couple of years. Gave it away to build and attract our business which we have done a good job at. Ourakes cme to disseminate products from around the world and have the increase coming up 20 in europe, 20 in the asian immunities. If we didnt do that, we would not be able to get. 5 or 30 of our revenue coming out of the United States. Thats always going to be a fluctuating number and we are doing Different Things to ulster that, whether it is Historical Data or derived data. Nowas down a little bit and its not a surprise. On the revenue on the top number, you have to realize we had investment revenue in other buckets. We took that out and in the fed account today which is yielding cme and its clients a much higher number. The analyst did not remove that from the other. The other reason is the mix of trading on our energy products. We became a victim of our own success and a lot more trading in energy, but a lot of it was by member trading which they traded at a lower rate. There were a couple of different factors and i think the overall story is a good one. Scarlet lets stick with the market data part of the business. What are you doing to make sure it grows in 2018 . Whetherou cant predict anything is going to grow were not grow in 2018, but we are facilitating several new hires to continue out and sell it. Were taking the inhouse here to make sure people are accurately paying for the data they are receiving and the distribution under derived and historical, this is very valuable data and you just cannot sell it for a price youre not sure what it is worth because our data comes from so many different participants. It is not bilateral data that two people made a trade and said heres the market data. Our data is constructed of millions of participants creating that one particular usee, so people want to that for risk models in different Asset Classes to build their own models. Scarlet when we talk about that market ada business, i think about ice and how they have required many market data assets in the past. Are you looking to make any acquisitions there . Decided to gove that direction. We are a transactionalbased company and have operating margins north of 68 and we are doing quite well in this is this. Those are things we do not discuss. And whatost important i am focused on is the client. I can continue to bring in more that will build our overall business. That is my focus right now. Lets move on to the londonbased derivatives business that closed earlier this year. Plansbout your postbrexit. What are you looking to do . Guest there are a couple of Different Things. When you look at what we were doing in europe, we dont need to be a brick and mortar. We are global in nature and we created this liquidity. One of the reasons we gave create ata away was to book here in chicago. At the big part of what we can do globally. We are going to continue to be part of the European Community and have that european Customer Base trading this evening. Scarlet libor, the benchmark discontinued by the end of 2021. One of your most popular toducts is benchmarked libor. So what does this mean for cme . Guest you have to remember that just because its supposedly going to be discontinued by 2021, it does not prohibit banks committing to libor today to report to stop reporting. Libor could be around after the 2021 day. We are working with the alternative Reference Rate Committee in the United States and we are going to create contracts based off of those reference rates which is based on a repo treasury. We are excited about the opportunities that we dont think it will be jeopardized one bit. Want to get your thoughts on the volcker rule. Bloomberg reporting relators are sitting down to rewrite the volcker rule. From where you sit, whats the single biggest priority in editing this rule . Not repealing it, but in editing the rule . Guest what they should have done from the inning and that is if they are going to have a rule that will restrict banks from shouldtary trading, they make sure the derivatives of that market are allowed to proprietary trade also. Prop are still able to trade in their market on the cash side. Is on the visit futures side. The one concern i have is we need to have liquidity and were going to get into a time of stress. The Energy Markets are fluctuating around. What if we have some serious volatility . We need more and more people to make sure we are providing deep of liquidity and why you would want to pull that out of the equation is a mystery to me. Aboutt we are talking bending the rules. There is the possibility of congress repealing the law. Iu see that cap given dont want to say unproductive, but how challenging it has been for congress to get stuff done . Guest i think unpredictable is the word i would use. Were not quite sure. The Health Care Issue came and went and now the big story of the day is going to be taxes and the big focus has been on regulation. The administration is focused on that, so i believe they will look to get some things done on regulation. Also thegulation is regulation, so we have to take that into consideration. There will be some amendments and they may need to go back to congress on parts of doddfrank. The choice act is always out there to get rid of doddfrank and amend titles to, seven, and eight. So it is very interesting. Im not saying its going to pass, but there are provisions that could go through congress. Julia thank you so much. Lets get a check on the Bloomberg Mark first word news with mark crumpton. s soninlawmp says the Trump Campaign could not have colluded with russia because the team was to dysfunctional and disorganized to coordinate with a foreign government. According to policy. Com, Jerod Kushner made the comment during a closeddoor session with congressional interns. The report said kushner was responding to a question about concert special counsel Robert Muellers investigation. A conservative House Republican is calling on mr. Mueller to resign, citing what he says is a conflict of interest because of firedlose friendship with fbi director james comey. Trent franks said he should step down to maintain the integrity of the investigation into a legend russian ties. President ointed after trump abruptly fired mr. Comey. The united rates says is as deeply concerned with the venezuelan government decision to arrest high profile opponents of president Nicolas Maduro. The state Department Says it is further evidence that maduro is an of dora terrien ruler who is not willing to respect fundamental human rights. One person was taken from their home in gum point and the mayor of caracas was also seized. That came hours after the u. S. Imposed new sanctions on president maduro and his government. The European Union says 23 cities are competing to host the medicine and banking agencies but must movein before the country leaves the European Union in 2019. Paris and frankfurt are among the city among the cities buying among the cities vying for the banking authority. Countries will pick the winners by secret ballot in november. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. I mark crumpton. This is bloomberg. Julia republicans are ramping taxes,r push to overhaul but what lessons can they learn from Health Care Failure . From new york, this is bloomberg. Is scarlet Bloomberg Markets. Im julia chatterley. Scarlet im scarlet fu. Julia republicans have to choose between pursuing another health bill or pursuing a tax overhaul because theres not likely enough time to do both. We caught up with republican senator jeff flake you had this to say on health care. What is over is an attempt to do it with just republican votes. I think we reached the limits of what we can do with republican votes on health care right now. The democrats standing pat, it sounds like it is over for now. Joining us from chicago is peter roskam from illinois. He serves as chairman of the house ways and means subcommittee on tax policy. Great to have you on the show. Thank you for joining us. Is health care dead and buried and do we need to put all energy into focusing on tax reform . It is deadnt think and buried. Congress has in the past demonstrated episodic efforts over time to revisit things. Is it on pause for now . Clearly the senate is struggling. Youinteresting thing as reported earlier, there is a lot of attention as it relates to informing the tax code and taxes are easier to deal with than health care. The proof of that is health care in the minds of a lot of people has become an orthodoxy for different political parties. Not necessarily orthodoxy and you can have a lot more opportunity because theres nobody defending the status quo of our tax code right now. You say easier to deal with, so before we get into the nittygritty, what kind of timetable are you working with . Is this going to get done by the end of the year . What kind of internal deadlines do you need to meet . Internal deadlines are one thing, but theres also a lesson to learn from health care. Part of the struggle with health care was chasing deadlines that didnt mean anything. Engineer. Rse if we want this done by the end of the year, and i think we do because we want this in place for the first and Second Quarter to feel the economic boost, what has to happen is after labor day, you need to see the house and Senate Committees the ways and Means Committee, the Senate Finance committee in a drafting stage and ultimately moving toward a markup in the middle part of the fall and dealing with it to get it to the ofsidents desk by the end year. Im not somebody who says it has to be done by the end of 2017, but you have to know where you are going to land otherwise it becomes the fish that will have gotten away. The struggle with health care ironically is to make sure we are successful on the significant tax. Julia there are a lot of questions here about financing tax cuts because we have seen a number of elements like the border adjustable tax, the higher rate tax for the highest earners falling away, and we did hear from the big six suggesting there was a viable alternative in place. And you give us an understanding to what the viable alternative is to financing tax cuts and reform . Setting aside the border adjustment tax, why do we want this to be revenue neutral . The reason is twofold its the only way you get to a permanent tax policy. Most folks look at this and say permanent is better than temporary tax policy. The other thing is we have a 20 trillion debt right now and we dont want to add to it. Coming up with a new trillion dollars is difficult and arduous, but it is there. What i have observed in talking a arechu and sees is that willing to put things on the table as it relates to deductions and so forth so long as they are clear that the rate is going to be lower. This is the work the taxwriting committees have to get involved in and i think the members on those committees are up to the task. Have explained all the problems and the reasons we want to roman it tax cuts and revenue neutral, but you say the means are there to make so. What are they . What is available to raise a trillion dollars over the next 10 years . I dont want to put things on the table and start a bidding process or negotiation in project in public. With the complexity of the tax code, the disposition of people to say we are willing to put various things on the table if you are telling us that our rates get lower and its more protectable over the long run. Thats the job for the taxwriting middies and there are a number of proposals out there. Ofave a constituency reasonable people who say get us permanent, get us lower rates. Nd here is why we wanted we want a simpler system thats going to create more growth. Scarlet i want to get your opinion on something senator jeff lake has written. This was in politico this morning, and essay entitled my party is in denial about donald trump. He says if i 2017 the conservative bargain was to go along for a very bumpy ride because with congressional the gemini and the white house, we had numbers to achieve some longheld policy goals youret based on conversations and observations, do others in your party see it this way . Is senator flake alone in seeing this . Guest the president is a controversial figure. Verymerican public saw a controversial election with controversial people running. They said we wanted somebodys going to flip the game board of american politics and thats what donald trump has done. Hes a controversial figure without question and what we are seeing now is some increasing surefooted miss that hopefully will be coming out of the white house, but are has to be a lot of soulsearching in the united in thesenate right now clear ability with numbers that are there to be able to pass bills that are significant and yet they are struggling and stumbling somewhat right now. That experience puts more pressure and creates more of an expectation that we focus in on Something Like tax reform to lower these rates and make the process for filing taxes a simpler one and ultimately driving toward the growth and increased takehome pay for folks across the country. Thank you so much for joining us. Republican leaders, including Mitch Mcconnell speaking on capitol hill he said he had a good meeting with the treasury secretary. Other leaders talked about their optimism on getting tax reform done. We will bring you other headlines as they cross. From new york, this is bloomberg. Scarlet this is Bloomberg Markets. Im scarlet fu. Julia im julia chatterley. We have the commodities close a look at what wet weather is doing to stocks Commodity Prices and a quick check on what is going on in the oil market. Just tipping down, below 50 a barrel. I think a psychological level of 50, we need more bullish news to rally at this stage. Scarlet there is talk about how the Global Oil Market is rebalancing. We will continue to monitor all of these moves for you. From new york, this is bloomberg. Is this a phone . Or a little internet machine . [ phone ringing ] hi mom. It makes you wonder. Shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. [ laughing ] so all you pay for is data. See how much you can save. Choose by the gig or unlimited. Call or go to xfinitymobile. Com introducing Xfinity Mobile. A new kind of network designed to save you money. Scarlet from bloomberg World Headquarters in midtown manhattan, this is Bloomberg Market. Commodity markets are closing in new york. Soybean andted corn futures are plunging. Lets shift to Oil Prices Oil declining for the first time in six days. Could trading below the 50 level, now off by 2 investors are waiting for tomorrows supply report. Stockpiles probably declined last week. Is waiting for a rebalancing in the Global Oil Market. Gold the dancing as the dollar falls on mix reports on the strength of the u. S. Economy. If you come inside the bloomberg , while july was golds test monthly performance february, it was a currently not enough to keep investors from departing the worlds biggest etf backed metal. 2. 4 billion was pulled from the spider gold shares, the biggest withdrawal since may of 2013. Moving to emerging markets, the Trump Administration sanctioning ennis whelan president Nicolas Maduro wallowing this weekend elections, but stopping short of banning imports of venezuelan oil. Highprofile opposition leaders were taken from their homes at gunpoint this morning. Joining us on the latest with chiefrmoil is the economist at three no caps off and the former head of the venezuelan congressional budget office. Great to have you on the show. What do you think of the results of the election, the flawed allegations and now what we are seeing this morning . Guest what we are seeing is a government that is very unpopular, that cannot win a conventional election but is trying to consolidate its hold on power. Recallar, there was the referendum and the government used its control of the courts to stop that. Now it came up with this election that it had on sunday which was the race was so rigged in favor of the government that the opposition decided not to participate. The government is essentially running against itself, but when the vote count came up, 8 Million People had voted, dont be 42 of venezuelan voters, much higher than what he got when he was elected. Theres been a huge economic crisis and we did some exit polling. Personsated 3. 6 million came out to vote, but all of this is setting up a structure to have a state where there are no democratic checks and balances. Onrlet when i read notes venezuela, there are notes on how unpopular he is. Given the path he is on, does that matter . What does it tell us . That there is one thing even dictatorships need some level of political support. That is the evidence that some governments become deeply unpopular and end up collapsing. Unpopularu are so even the military is unable to control it. Is 17. 4 it is low but not as low as it could be for the economic crisis because there are a lot of people who remember president chavez fondly , so the reality is that this country is split, the opposition , there is a pretty important minority and that poses constraints on how you can think about how venezuela can be after Nicolas Maduro. Julia we talked about actually sanctioning majuro is a symbolic move that doesnt make any impact. The jury is out on whether the United States will see if it from sanctioning the oil industry and whether it will put more pressure on the people. What is your view on the . Anctions having the oil market if he is so unpopular, are the people going to have to rise up against them rather than passive sanctions forcing them out . Guest i think so. Rarely effective and in some instances like in a ran, they were effective. But this is a case in which they are trying to get a government to act differently, but the government can act differently yet remain power. Here, you are talking about getting a government that is unpopular and is basically becoming a dictatorship. It is very difficult. We will release these sanctions if you give up power . Sanctions are a very blunt instrument and could cause a lot of damage to the venezuelan people. The survey on how the surveillance felt about sanctions, only 26 would support sanctions. To this issue of maduro being down but not out in terms of popularity. He still has popular supporters. The people on the street are being hurt because of what the u. S. Is doing. Who knows if that popularity could increase again . Scarlet venezuelan bonds fell and venezuelan defaults of decline. The implied probability of a missed payment is 64 . How quickly could things deteriorate and when you look at ae events, could we get regime change . Creditif you look at evolved swaps over the past three years, they have been at that level. 15, isit goes down to essentially higher levels so the market has very little confidence. It has paid much more than the market has expected. Losing theirid of refineries and access to u. S. Markets. This is where sanctions could make it different. Forced venezuela to develop from its investments and take away sales and theres nothing to lose. Its not straight cut. You could get the government to maintain it is still in power. The reality is we get into this kind of regime and you look at cuba and north korea and zimbabwe, you can have collapsing economies and yet these authoritarian governments maintain themselves in power. In that very durable regard. Thank you for joining us. Lets get a check on the headlines with bloomberg first word news with mark crumpton. Mark secretary of state Rex Tillerson says the United States must apply peaceful pressure on north korea. Inngyang has raised concerns the International Community after conducting to recent Intercontinental Ballistic Missile test. Secretary tillerson says he does not blame north koreas ally, china for the situation but added that china can influence north korea as no one else can. A coalition of 16 state attorneys general led by eric schmidt are men of new york has filed a lawsuit charging the federal Environmental Protection agency with illegally stalling the designation of areas impacted by unhealthy levels of groundlevel ozone. The coalition is challenging Scott Pruitts oneyear delay, saying that it violates the requirements of the clean air act. Chuck minority leader schumer is accusing President Trump of petty and childish behavior after the president continued threats to stop federal payments that help millions afford health coverage. Which insurers used to lower outofpocket cost for low Income Customers totals 7 billion this year. Lastly, the president tweeted if did improve the Health Care Bill that the bailouts would end very soon. Company has begun microchipping employees so they can log onto computers and buy snacks by waving their hands. Three Square Market held a chip party today for employees to have a microchip embedded in their hand. The companys Vice President for International Development was among the more than 50 Company Employees to be voluntarily microchip. News 20 hours a day powered by more than 27 hundred journalists and analysts in over one hundred 20 countries. Im mark crumpton. This is bloomberg. Is an interesting scarlet story voluntarily microchip . Scarlet we both looked at that with our mouths wide open. Coming up, under armour underperforming why the Athletic Apparel maker is struggling to keep up with the competition. York, this is bloomberg. Julia this is bloomberg scarlet markets. Im julia chatterley. Im scarlet fu. Utility shares are the secondbest performer after financials and they are the subject of todays sectors by her report. It is unusual that we see them go up together because they are usually responding to bond yields. Utilities were up as we feel deep bond yields down. The spider etf is up about. 6 and if you look at some of the best performers, it is a wide array of power companies. Many of the large ones are trading higher. You can look at the bloomberg we made a chart of the correlation between the xl you and on yields. It is clear theres a negative correlation between them. We have a sort of inverted yield curve showing when the yield curve is going down, bc utilities going up and vice versa. Its pretty consistently been a Strong Negative correlation going back over the past several years. Utilities to carry a fair amount of debt and they pay out relatively high dividends, so there are yield competitions that go on as well. The best performing stocks again today is a company that has risen a bit over the last couple of days after the company said it was abandoning construction of a Nuclear Power plant set to take place in south carolina. It is already under construction. The building is partially there 9. 9is already spent billion on this construction project. Now it is giving that up because they are partnering with westinghouse and in part because of cost overruns and because of natural gas as well. When they agreed to the project, it was in 2008 when gas prices were much higher that they are now in the was not a perception that shale gas would consistently provide a relatively low alternative to Something LikeNuclear Power. You see the natural gas chart price going to the end of 2008. So theres only one Nuclear Plant under construction in the United States. Thats the Southern Company project. Scarlet they will have to spend eventually on generators. It cant just continue going with what it has. It cant and thats what the company is saying. They will probably have to add more gasfired plants and will potentially have to recoup some of these costs. I talked to a reporter from Bloomberg Intelligence. It is a complicated situation. They are set to ask for a rate increase amortized over the next 60 years to customers to recoup the cost. You could say there might be pushback potentially, some political issues going into this. It is an ongoing situation but he stock has reacted quite positively. Thats part of the whole situation the company is cutting 600 jobs and future jobs will not be added as well. Julia thank you for that. Gettingmour shares punished in trading today after the company cut its annual Sales Forecast amid sluggish american results. We see Incredible Opportunity and we are not pleased with where we are positioned right now. Areee what todays actions and we are thinking about 2017. Joining us now is our apparel and footwear analysts. What is going on here and what do you make of the restructuring . A lot of sales are focused on the United States. Guest it is about 8 of revenue and i think this was about footwear. Some would say its a broad engine for the company, something with a lot of resources and it just did not happen. You can see their foot where sales growth was outstripping sales growth. So troubling when seth curry is such a hugely marketable star . Most of the revenue comes from the training. You dont seven curry provided some nice stuff last year. What are they doing to that . The stock tanked as well. Pain in the more interim whatever they are doing . How do investors feel about him . Guest there are a couple of things. You have to bring in the right people. He comes from the footwear and retail world and hopefully hes going to put more and get the right inventory at the right time. The other thing is you can have all of the marketing but you have to have good looking footwear. Those are a couple of things they have to focus on. You mentioned the leadership changes they have made. Stan poser says this change could bring a temporary cause. Our investors increasingly looking at this as a more Mature Company . Guest i think they have to. Want 25 every single quarter. Some investors might look at it as too expensive and thats part of what we see. Scarlet thank you so much for joining us. Its now time for the Bloomberg Business flash a look at biggest business stories in the news. We begin with anthony scaramucci. He may have exited the white house but lands to sell this sky bridge state are still intact. An Investment Firm is expected to close in the next few weeks. Says he isll and baffled by allegations his rules to buildd the grover pipeline. It extends 700 miles across the eastern u. S. A 32 mpany agreed to sell stake to blackstone for over half 1 billion. Excuse me a billion and a half dollars. The on sale said to be considering whether to buy the houston rockets. According to people familiar with the matter, the team could fetch a price of 2 billion. Beyonce is a houston native and has performed wearing a rockets jersey. That is your business your business lash update. Comingooking at me , los angeles agrees to host the 2028 summer olympics. Many cities no longer eating for the games. We will take a look at the economics of the olympics. This is bloomberg. Julia this is Bloomberg Markets. Im julia chatterley. Scarlet the city of los angeles reached a deal with the National Olympic committee to play host to the 2028 summer games. It brings the olympics back to the United States for the First Time Since 2002. Away officials called it an unprecedented opportunity. Increasingly, the Olympic Games are becoming a tough sell for cash strapped cities around the world. Is most recent announcement both paris and l. A. Were awarded the games at the same time. That means things are changing. Guest this is something they have been talking about since the spring. There were not enough cities stepping forward and with only two stepping ford, they said lets lock this down for the next 11 years while we sort out how to more cities coming to the table. Julia they are losing more countries in terms of the options than they have wanting to do it. Olympics,ng got the it was against because extent. Rome, 42024, they had hamburg and budapest drop out. So they are looking at a potential crisis on the horizon. In contrast that is to when beijing won the bid for the olympics. The ioc is also contributing money to paris and l. A. They will be making pair they will be making payments before it even takes place. Guest they were set to give the host of the games 1. 7 billion. To get los angeles to wait, they are agreeing to 1. 8 billion to 2 billion. Theyre going to front the money set that l. A. Can maintain an office for the link extend they will give up their rights to 20 of any profits. Profit,turns a typically the ioc would say i get 20 of that but they have waived that and they have made a number of concessions that could be worth hundreds of millions of dollars. Julia whether its athens or sochi and the corruption scandals around rio and the itconditioning units is just that when it comes down to it that it doesnt pay . You get all of the tourism the cost of producing it and the assets to create the infrastructure is wasted . Guest exactly. A couple of things have to happen. Andioc is putting up more its a matter of finding cities that make sense. Rio was a bad idea. This model of a transformational game takes a city and kickstarts development has not worked lately, especially in developing countries. Los angeles says we dont need to build anything permanent that we are not already planning to build and will be privately financed. And theyd scarlet will house the athletes at ucla dorms. Polls show most citizens are on the board. There is a group that is saying its a excuse of resources and our priorities are out of whack. We have traffic problems and homelessness problems and homelessness problems in this is not going to address that. Scarlet julia great in your insights. Apple reports after the bell. We will look at the challenges facing the country as they prepared to release the iphone 8. Its 3 00 p. M. In new york and 8 00 p. M. In london. Im julia chatterley. I am scarlet fu. Welcome to Bloomberg Markets. Julia we are live from bloombergs World Headquarters with the top stories we are covering on the bloomberg and around the world. In the markets, the dow reaching near 22,000 and stocks are being pushed higher on the latest wave of corporate results. The worlds most valuable company is set to report quarterly results, and investors could be hit by a delay on the newest iphone release. The tech sector could point to larger trends in markets. We are one hour from the close of trading. Lets get a check on markets with julie hyman. Julie i think we might have to wait a little bit longer. We have seen the dow pretty steady. We havent seen any big lengths up or down for that matter, so it doesnt look like we are necessarily going to get to 22,000 today, a level that is not fundamentally important, but some researchers watch and is seen as psychologically important, but it is trading at a record. The s p and nasdaq are trending higher today. We are watching what is going on in the rates market. Here we are seeing the dollar bouncing back after some weakness lately. At the same time, we are seeing rates lower, did 10year yield down by four basis points. This turned around after we saw the auto sales data. Htat bought briar broug buyers into the treasury market. Take a look at the bloomberg. This is something that the folks over at the nliv blog pointed out earlier today. You can see the links between stocks and bonds weakening. You are seeing it at its lowest in about a decade here. This could be a sign that those lower yields you are seeing as a proxy for u. S. Growth and inflation, that they will stagnate in the long run, which would temper expectations for the fed continuing its tightening cycle. We will continue to watch this. At the same time, we see the dollar strengthening, bouncing up. We see oil going in the opposite direction. Its down by 2 , couldnt hold that 50 a barrel level, and its bringing down most of the Energy Sector with a couple notable exceptions. Chevron is up for the fifth straight session, its longest winning streak going back to 2014. It reported its earnings last week. Peabody, coming out with earnings. This company in the last six months exited a yearlong bankruptcy, and one analyst called the results it reported today easily the most impressive it has reported thus fire, higher coal pricing helping matters. Xerox has been strengthening in the wake of its earnings reports. The Bloomberg Intelligence analysts who cover it say sales have fallen 8 . However, xerox said this years cost cuts are on plan, so he said that could be reassuring investors. That stock is at the top of the s p 500 for today. Scarlet we will keep an eye on that. The worlds most valuable company is set to report earnings. We are talking about apple, but investors could be in store for a letdown when it comes to apples future forecasts and the timeline for the release of the new iphone. Joining us is mark gorman come in joining us from london is Caroline Hyde who looks at all things tech. Lets start with you, mark. I dont want to beat around the bush. Lets get straight to the new iphone, which is what Everyone Wants to know about. Couple ofing to be a different phones that apple will be releasing in the next couple months. Talk about what is on offer in the next upgrade cycle. Mark for the first time, apple is going to be releasing three entirely new iphone models. The first two are going to be upgrades to the 7 and 7 plus. We are going to get a 7s and 7s plus, faster, better cameras, a few new bells and whistles. On top of that, we are going to get a whole new number, whether they call it iphone x, the anniversary. That is going to have a lot of new functionality, ranging from a 3d facial scanning sensor to unlock the phone, and much faster processor, new ar integration, upgraded cameras, and all sorts of other bells and whistles. Julia that makes the fourthquarter forecast that weve got, the quarter ending in september, really critical. If they manage to get this thing out on time, that will impact that quarters numbers. If there is going to be some delay, perhaps those numbers will not be in line. They could be slightly down. Is that right . Caroline precisely. Analysts are expecting a 5 increase in its fiscal fourth quarter, its september quarter, but as we are hearing, the bells and whistles, typically the diode screen, the oled screen, could mean we are going to get supply issues. That has been flagged by the likes of analysts at Morgan Stanley, bank of america, goldman sachs, wondering whether they will make their september crescendo. October . E pushed into will it be pushed into the fiscal first quarter, instead . If we see anything less than that 5 uptick in revenue come if we see earnings per share fall short, that could signal some sort of delay. I want to take you to the bloomberg and look at fa. This is why it is so crucial. The new iphone, because it is 62 of the revenue of apple next comes the Services Part of the business at 13 . Julia i want to ask you very quickly when it comes to this china, i want to talk about if we get strongerthanexpected results for the iphone, it could mean that people are not putting off or delaying their purchases of the next iphone. They are actually going with this one. Do think that could be some sort of counter indicator for investors . Mark it would be interesting to see if people are still buying it. Looking to china, there are people who might be on the iphone 6 and 6s. They had huge super cycles with the iphone plus in china in 2014 and 2015. People tend to buy new phones every two or three years. There may be people jumping on that bigger iphone screen bandwagon. Its quite possible. Lets talk about services. Yes, iphone is where its all at. You showed us that with the fa screen with the iphone making up two thirds of revenue, but apple once to focus more on services because that is where the growth is. Of apple services, which is gaining the most traction . Which ones do investors think have the most potential . I caroline think there is so much focus on the app store, apple music, which hasnt managed to make waves in comparison to the likes of spotify. Many are reasoning as to why they havent gathered steam, but many people want to see how the apps will develop, and notably, we have seen some movements in china over the last couple days. They have been withdrawing apps on the app store in china. China is the number one mobile market in the world now. Theyve got to be pleasing them. Many are reasoning as to why they havent gatheredin terms oe the new areas they need to be draining. This is still a luxury product. We have seen how well samsung, china,es of xaomi in much more powerful phones at a cheaper price point. Julia brilliant preview, guys. Thanks to bloombergs apple reporter mark gorman in San Francisco and Caroline Hyde in london. Lets get a check on the headlines in the bloomberg first word news with mark crumpton. Mark Senate Majority leader Mitch Mcconnell tells reporters that he, minority leader chuck schumer, and treasury secretary Steven Mnuchin a ar looking for a way forward to ensurr the debt ceiling is raised. Mcconnell laid out the timeline for tax reform in the senate. What we intend to do is to take up tax reform when we come back after labor day. You know, under the constitution, it will start in the house, but both the Senate Finance committee and the house ways and Means Committee will be going through a marco process. We will need to use reconciliation. Mcconnell mark said he also sees an opportunity to Pass Health Care legislation through the reconciliation process. Secretary of state Rex Tillerson says the American People want better relations with russia. His comments came as he announced he will meet this weekend with Russian Foreign minister Sergey Lavrov in manila on the sidelines of a meeting of Southeast Asian foreign ministers. Relations between washington and moscow have been strained after revelations that russia meddled in last years election and more recently with both countries imposing sanctions on one another. Tillerson added that russia must take some steps to improve relations. It is one of the biggest moves militaryadimir putins buildup. Up to 100,000 Russian Troops will hold maneuvers close to the eastern edge of nato territory this summer. Officers say the drills could be a pretext to increase russias military presence in belarus, which borders three nato countries. Feist president pence is in these so in the former soviet republic of georgia. He said the u. S. Backs of georges desire to join nato. Attorney general Jeff Sessions has chosen general mark engine to lead of the federal bureau of prisons. The general has 35 years of military service and most recently worked as an army advisor on policing issues. The u. S. Prison population is expected to grow under session tough on crime policies. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. Julia thanks so much. Coming up, we will hear from our interview with howard marks. Why he is really in the alarm bell on markets. From new york, this is bloomberg. Scarlet this is Bloomberg Markets. Im scarlet fu. With stocks hitting record highs, the dow Just Moments Away from 22,000, howard marks is sounding the alarm. His recent memo to clients warns that markets are overheated and risky. Exclusive interview, Erik Schatzker asked him if investors have the patience for underperformance. Howard i believe so. You know why . When they sign on, we tell them, and you gett cooks into a climate where the people who take the most risk are making the most money, it will be us. Our clients are intelligent clients, and they sell select. The ones who come to us are the ones who say, i dont necessarily want to make the return on the market when it does well. I want to be protected in the bad times. Erik at one point in this memo, you call the Fee Structure around soft banks 100 billion vision funds questionable. Is that fair . Howard its not really the Fee Structure. Its the capital structure. Fund, put 100 into that 62 goes into debt and 38 into equity. If they make good tech investments, you only get that return on 38 of your money, but i think you are taking substantial risk on all of your money. I dont know the portfolio. I dont know what they are going to do. Erik one of the things they might do is buy charter for 65 million. Is that a wise use of capital . Howard i dont know the situation well enough, and i would never say on your show whether it is or not. The point is, you have upside on 38. I believe you can have downside on more than 38. The calculus is weighted against you. Erik if you were to look at every capital and Fee Structure on every oak tree that has ever existed, could you say with confidence that none of them was ever questionable . On our closed and funds, we get 20 of the profits. 8 before weke come in for our 20 . Clients have to make 8 net of fees. I think its fair. Carried interest has been the story of the investment business. You can always complain about it. You can always say, is it fair to get carried interest. Shouldnt it be 20 as opposed to 15 or 30 . Erik what about the things stocks . They too merit special mention in your memo. It appears you have some concerns about the momentum, the amount of money people are pouring into them. If we were to measure them on the basis of valuation, and we use the price to forward earnings, the valuation has been coming down for most of those stocks. Howard the ones that have earnings are doing well earningswise. I think they are still high. I think they still embody a lot of optimism. My point was not that they are individually or that they are overvalued. Its that the anointment of one group of super stocks is indicative of a bull market. You cant have a group treated like the things have been treated in a cautious, pessimistic, sober market. That should not be read as a complaint about the group but rather indicative. Erik of all the things you highlight in the memo, banks, stocks, etfs, emerging market debt, skinny spreads and credit, single out one for me. What is the one that concerns you the most . Howard im going to single out two, although that is probably an oxymoron. Netflix bonds. To a video store, you rent a video. Some videos give you the choice of an ending. What is a good ending for that bond . That chews up company capital. The coupon is the best you can do. All the other endings are worse. I think the fact that you will the other is the fact that argentina, emerging from bankruptcy, can issue 100year bonds. They have had five devaluations in the last 500 years. What is the chances they get through the next 500 years without a repudiation, coup, or scandal . It is all about investors willingness to take risk as opposed to insisting on safety. When people are highly willing to take risk and not concerned about safety, that is when i get worried . I get worried. Julia that is a monster memo. Scarlet no kidding. Full of candid observations. Julia a fantastic interview. Howard marks in an exclusive interview earlier today on bloomberg. Now its time for the Bloomberg Business flash and a look at some of the biggest stories in the news. Clients are said to have poured 15 of assets from the main fund, leaving around half the value of a year ago. The fund is down just under 2 of this year. Facebook is said to be developing a video chat device that would make it seem as if people are in the same room. The company is building a lab to develop the athome hardware that will be powered by artificial intelligence. The product could be announced as soon as next spring. Ferrari is considering adding a sports Utility Vehicle to its lineup. The move would be part of a major expansion beyond its traditional supercars. Ferrari is said to be considering building more hybrid models to improve efficiency and attract wealthy buyers. Your business flash update. Still ahead, options insight. Todays trade is focused on Canadian Solar. The stock is up more than 30 year to date. From new york, this is bloomberg. Julia this is Bloomberg Markets. Im julia chatterley. Scarlet im scarlet fu. Its time for options inside with julie hyman. Julie today we have alan the command of bullseye option. Thank you for joining us. The president s comments notwithstanding, we have been talking about the record on the dow all day today. The s p and nasdaq have not reattained their records, and we have seen on a relative basis weakness. Can we continue to see new highs for the s p and nasdaq if we are not seeing that big cap tech participation . Yes, we can up silently see new highs over and over again. Of course, you have a bit of rotation and shifting. The dow has assumed leadership position mainly because of boeing. It has a disproportionate effect on the dow, which is based on price, not market capitalization. Every time we have seen a it has happened every single time in history, so look for another 5 boost in the tech 100 stocks. Looking at the s p, i talked about 2500, but i saw Morgan Stanley came out with 2700, which is another 7 up above. Julie either way, we are going higher. Lets talk about your trade of the day. It is Canadian Solar. This comes off first solar coming out with betterthanexpected earnings, lifting the whole sector. You think Canadian Solar is at least going to maintain some of this game over the next six months or so this gain over the next six months or so. Also, we have a summer melt markup melt up. We saw for solar take off, and we had Canadian Solar take off. This was a stock that traded between 12 and 16 in the last few weeks. Now its giving us a Second Chance, a Second Chance on solar to lean on that 16 level. What im looking at is the 14 call for january, trading at 400. That for dollars, project it on top of 16, that takes it to 20. The option will gain 50 in value. Julie im just curious why give it i know i have asked you this question why give it so much time to play out . How do you pick the time horizon . That segues into volatility. Volatility is still low, and it can go a lot lower. Can by six months of time it will cost a few dollars more than buying three months of time. Why not have that extra window of opportunity echoed the vix is at 10. That extra window of opportunity . The vix is at 10. We have been trading between 10 and 12 in the last few weeks. Julie thank you so much. We appreciate you talking the vix and Canadian Solar with us. Julia thanks so much, julie. Still ahead, apple is set to report results after the bell, but investors are looking ahead to the fourth and bracing for potential delays in the release of the iphone 8. From new york, this is bloomberg. Mark it is time for first word news. Secretary of state Rex Tillerson says the United States is trying to lessen tensions with north korea. Pyongyang has raised concern after conducting two recent missile tests. We felt the appropriate thing to do first was to seek peaceful pressure on the regime in north korea. A have them develop willingness to sit and talk with us and others, but with an understanding that the condition of those talks is there is no withe for north Korea Nuclear weapons. Mark secretary tillerson said he does not blame north koreas ally china for the current situation, but added that china can influence north korea, quote, as no one else can. President trumps soninlaw said the campaign could not have colluded with russia because the team was to dysfunctional and disorganized. Kushner, Senior Advisor to the president , made the comment during a closeddoor