southwest airlines and eli lilly. ricole in paradise, puerto six bankruptcy. -- seeks bankruptcy. ♪ stephanie: welcome to bloomberg go. >> we have a big program. explain while they did and did not do. stephanie: we have eli lilly, dow chemical, southwest airlines, united and continental. one thing, how about the new york mets? >> sorry, chicago. stephanie: the mets suite you -- weaped you.- s

>> erik schatzker is in san francisco. erik: good morning everybody. stephanie: up early, you look good. erik: you know what to expect of me. >> the first wordv. : mario draghi will show he is ready or than ever to show stimulus without panicking investors. he is said it is too early to the side whether to expand the bond buying program. bloomberg critics the ecb will keep interest rates unchanged. the decision in 45 minutes. in berlin, a call for an and to the incitement blamed for a wave of palestinian attacks on israelis. john kerry says it was time to deescalate the harsh language and violence.

the israeli prime minister said the palestinian leader is to blame, saying he is spreading lies that israel wants to tear down a site sacred to muslims. house republicans are on the verge of resolving their leadership issues. -- about two thirds of the house freedom caucus backed ryan in a vote last night. the house is expected to formally choose its new leader next week. the markets, here's matt miller. >> after drops in the s&p, i yesterday, the couple of big earnings stories that stephanie pointed out. alchemical beating these -- dow chemical eating the street. we will looking for $.69. sales missed, revenue was down to, $12 billion compared

$12.4 billion. they sold the chlorine business and are looking at the possibility of an accra science business. estimates,beating shares up in the premarket, $.89 with what eli lilly earned. to $4.96 billion but it missed the street's estimate. same story this earnings season. valiant, massive story after yesterday's 20% drop. a drop of 1% in the premarket. stephanie: we will take you to malta, where mario draghi's challenge is to show he is ready to step up the stimulus in europe without panicking investors. what can we expect?

he has to walk a fine line. sure, thing which is according to analysts is that he wants changed rates. it is too early to tweak the , mariowo week program draghi says it is ready to expand the program by increasing purchases or extending the time frame but it will be too early. they said they need more data and information on how the euro is doing. when asked it -- >> we do not expect much from the announcements but more about the press conference afterwards about what they are thinking about doing. probably trywere to reinforce the ecb's dovish message that they are ready to act. inflation is -0%, prices are

falling again for the first time since the ecb started doing qb. this is due to falling oil prices and ecb has to look carefully at this and we will see if you fall in prices will impact the new forecast. what the ecb expects inflation in the euro area. us.hank you for joining we will be bringing you president mario draghi's news conference followed by team coverage at 8:30 a.m. new york time. across the wire yesterday, the wall street banker who rebuilt cit group is stepping down as ceo and passing the reins. you spoke to him yesterday. quite right now -- why right now? erik: he is only 60 years old, i was shocked. do, what is work to

he doing retiring at 60? way, he seess himself as a turnaround guy. he has been there 5.5 years and inherited a company that had come out of bankruptcy and was losing money. he said there were a lot of things broken and they are fixed. it is time to move on. he wants to spend more time with his granddaughter and pick up golf. he would like to ski and play tennis. i asked if he could see himself outside the action under pressure, outside. ? he said yes and no, yes for the short-term and then we will see. i think the last chapter of john boehner has yet to be written -- john fain has yet to be written. stephanie: we may see him back in the near future. tell us about his successor.

>> the incoming cfo is a woman as well. this is a big day. erik: it is a big deal because the new ceo will only be the third woman to run a large commercial bank. she spent 20 years at citigroup. then she moved to the american unit of the royal bank of scotland. the citizens financial group where she was briefly the ceo. she has been on the board of cit for a couple of years. -- more of aer banker than john fain. he turned around the new york stock exchange and put it in the position to be the company it is today by getting electronic and getting rid of the big board. that is why she is a better fit in the board's view.

stephanie: you have been a patient german -- gentleman. what is your take? >> the timing speaks to where cit is in their turnaround efforts. john fain is not somebody we think of as a commercial banker. his choice to run cit in the and led awas curious lot of people to question why he was there. the fact that it is out of bankruptcy. it has gotten some stability and he steps aside and lets ellen takes over make sense. stephanie: there it is a reason erik is in san francisco, you'd talk to john stumpf about yesterday about why the bank is staying so conservative. >> we do not have a strong interest in having indigenous assets. because, how will we compete with the wells fargo of china or

the wells fargo of england? we bring nothing to the game. we tend to think of ourselves as , following our customers, we love our 3% but do not expect that to outgrow the we are doing in the u.s. whatanie: erik: -- erik: is jp morgan doing in asia? they all have their own strategies and some of them are very successful. for wells fargo, we tend to have a conservative view and we know what we are good at and what we are not good at. there is so much opportunity in the u.s. stephanie: what was your big take away? he insists that wells fargo is not changing strategies . not an unfair question. they did the deals with ge taking $50 billion of assets and talk about doing more lending to

blackstone and going beyond their home term in credit cards. soundmore things that like the bank is more comfortable with risk and john stumpf insist not with the same bank we have always been. >> these big institutions look for growth. u.s. companies traditionally say let's go overseas and he is saying they will not do that. he has branches on every corner, what does that mean for growth, they have to take more risk? >> a lot of people think that, especially with credit cards. wells fargo is not a big national credit card lender like chase or citi. they have talked about selling credit cards to noncustomers much.you do not know as they had been selling credit cards to wells fargo customers who had deposit account, people

who bank there, had mortgages there. now they will go at out to folks who have no account at wells fargo and you do not know about those people. you know about the place they live but you do not know what their credit history is or their ability to repay their loan. that part of the credit card business is much more -- riskier. stephanie: jamie dimon seemed built up on the u.s. economy. economy says the u.s. is fundamentally strong, very fragmented, pockets of strength in places like san francisco, but 150 miles east or south into the central valley around fresno you will find very little strength at all. in his view, it is not the u.s. economy that is the biggest risk to itself it is something else and here she is. -- here he is. >> you cannot argue with the

--sumer cop is being up and the biggest risk to the u.s. economy is what is happening outside the u.s. erik: the u.s. economy is most at risk from what is happening outside, the fed -- things the fed cannot control. we will be reminded of that in about 30 minutes when we get the ecb decision and at a: 30 when we hear from mario draghi who will not have an upbeat story when it comes to the european economy. stephanie: not if he is on the same page christine lagarde is on. we will check in with you later. ceo,we return, southwest we will talk business at the world largest low-cost carrier. president obama taking action to help fight puerto rico's debt crisis.

♪

vonnie: here is your business flash, china taking steps to fully integrate with global financial markets, officials will announce 82020 deadline to dismantle currency controls. that would flow china's currency and give for an investors greater access. -- foreign investors greater access. volkswagen may have the most expensive recall ever, they have to bring cars in with them -- environment regulations. whatr cost are part of they have to spend after being caught cheating on admission tests. the world's largest casino operators, -- hurt in theen

world's largest given market. under armour earnings out, what is the headline. share versus the streets estimate of $.44 a share, $1.2 billion versus the street estimate of $1.18 billion . under armour is boosting its full-year revenue forecast. expect to earn about $3.91 billion compared to previous forecast of $3.84 billion. the shares up in the premarket. you can see they are up over the last 12 months 50%. big gains for under armour and it will continue. kevin franknie: forecast they would double the billionin 2018 to $7.5 and they are on the right track, last year revenue was $3.15 million -- $3.15 billion.

under armour up 47% and 90 up 38%. -- nike up 38%. we are wearing more sweatpants. matt: it is all about the shoes, most of under armour's money comes from clothing, their shoe revenue was up 40%. s. has to be the shoe stephanie: i am pretty sure that slogan came from someone else. we turn to the white house. they are taking action to combat gregory go -- puerto rico's debt in manhit let's bring laura. >> this plan was released last night, very different than a

superabundant proposal that has been out there. this is something that goes into chapter nine. not what a lot of bondholders have been hoping for because it -- something the bondholders -- you can force them -- we say the white house said this but they need for this plan, congressional action and that is not an easy thing to do. the announcement came out of jack lew, the treasury ,ecretary, and silvio burwell this is the fact i learned, i knew there was high unemployment, 40% -- 46% of all people are eligible for medicaid. an important part of this plan is to the u.s. to step up on

medicaid. economic, not just a debt problem, and economic problem. and that is what hhs is saying. it is incumbent upon the white house to get republicans on board and start to not only talk about this but pass something. is that going to happen? stephanie: think about who owns their debt, john paulson, where do they want this to go? could be find in chapter nine, they are familiar with the rules, they know what lawyers they need to hire. i do not think that is uncomfortable for some people but in certain parts of puerto rico that would give you a greater amount of losses. stephanie: i do not want to say the governor is over his head, he has not addressed the u.s. government since 2011 and has no

experience in this, what can we expect out of him? >> he will act out the same comments, you need to help us, we cannot do this alone. before he has not been willing to give power over. part of this proposal says you have to enact more austerity and he has not shown a willingness to give it power to someone else. you will probably have to see, if anyone in commerce will back the plan to have that power and i control being given over to the federal authorities. david: much more to come. stephanie: he does not have much of a choice. southwestavid: airlines beat the street by two cents a share but missed on revenue. joining us from dallas is the chairman, president and ceo of southwest airlines, gary kelly. take us behind your numbers. on earnings-per-share, congratulations. what about on the revenue side?

gary: i thought revenues were very steady during the quarter. we have been expanding this year. very pleased with our expansion, especially out of dallas love field, we just launched a new service last week internationally out of houston hobby. all in. our revenue performance was really good, demand is strong and we will continue growing your. stephanie: do you feel like you are damp for doing your homework and playing ahead because you had hedged you did not benefit from the lower fuel prices as other airlines. gary: our earnings-per-share were up 71%. a record return on invested capital, well over 30%. fallingdo well in a energy prices environment which is what has happened.

we may pay a little bit more than market prices when prices go down so far, but that is what hedging is for is to protect us the other way when prices go up and do catastrophic territory. territory.astrophic these are record earnings and our hedging program is something we do over a long time and has served as well. david: talk about the international expansion. andimportant is that to you your future strategy and future growth? with think -- we tend to think of southwest as a domestic airline but you are moving into international markets. gary: about 2% of our capacity today is an international markets. south,ll directionally the caribbean, mexico, central america oriented. in terms of our future expansion

, that would be our biggest opportunity, we will still have plenty of opportunities to add new routes within the 48 states but it is connecting cities we already serve and adding additional frequencies. it is very important but it will not take away from our domestic focus. stephanie: stay with us, matt miller has a chart. the market feels good about southwest when jet fuel prices drop and they did not get punished too much when jet fuel prices took off in 2007. the entire market got crushed in 2008 and 2009 by when easyjet fuel prices come down, southwest share prices skyrocketing. even though they are hedging, the market is rewarding them for when fuel prices fall. stephanie: it seems like the market you did your homework, what is your biggest challenge right now? gary: our fuel costs were down several hundred million dollars

compared to one year ago. even with our hedging we are seeing significantly lower costs and that is what was driving the strong increase in earnings. i think we are in a time where we have transformed southwest airlines, we have a lot of infrastructure investments we are currently making for the future. new commercial systems technology, primarily a reservation system replacement and also investing in operations technology. you are trying to focus on the basics, reliability, hospitality of our people, and we are growing the southwest network. all that keeps us busy and all that we want to perform very well but we have a tremendous opportunity to continue the success of southwest into the future. >> tell us about unions, the industryon, in your the negotiations can help determine profitability. where are you with the pilots union?

gary: we have a long history of being a great place to work. we have been unionized at southwest airlines since the 1970's. nothing new here. union negotiations are very vigorous. we are a family. we can work through these things. i am hopeful we will get open contracts agreed to and ratified. our people do a great job and turned out terrific results and worked very hard to transform southwest, especially over the last five years. stephanie: we have to leave it there, congratulations. we will be back. ♪

i just had a horrible nightmare. my company's entire network went down, and i was home in bed, unaware. but that would never happen. comcast business monitors my company's network 24 hours a day and calls and e-mails me if something, like this scary storm, takes it offline. so i can rest easy.

what. you don't have a desk bed? don't be left in the dark. get proactive alerts 24/7. comcast business. built for business. ♪ stephanie: look at that beautiful new york city morning. we are right in midtown

manhattan. welcome to bloomberg go. we are having a very big morning in terms of earnings from major companies. post --the new york wall street journal. fan.legitimate mets stephanie: a boston red sox fan. ball lastcrushed the night, one still going over lake michigan. cubs --ny 70 for the sympathy for the cubs? fun, i'ms great, it is still on the bed like an. -- bandwagon. stephanie: we will find out about mario draghi but do you want to break some news for us? matt: dozens of companies coming out with earnings and caterpillar is our third quarter

items, $.75 a share that will miss the $.77 estimate. missing the estimate as far as gps, how did they do as far as revenue, $11 billion, missing the estimate for $11.3 billion. we have seen more companies miss on revenue that on earnings but caterpillar is missing on both. in the premarket, shares down 2.4% and falling at $67.99. still waiting on united airlines and they are out. equity, a gives you bloomberg news and bloomberg first word in all different bloomberg sources. you can trust what you see on the screen. quarter profit adjusted mess. 453, that is a

-- miss. united airlines and caterpillar missing, a couple of down arrow stories. we did have dow beating and eli lilly beating but as tom pointed out, they are putting out a 16% decline in revenue. dan loeb will not like that. david: a lot more to come let's go to tom keene. you have a timely read. into howre getting many pumpkins do we need at the house. i am going as revenue recognition for halloween. i will wear a bowtie. let's go to the morning must-read, a smart asset.

coincidednt story, it with looming patent expirations on household name and medications on by major drug companies which brought about its audacious takeover spree the industry has ever seen that is the backdrop for what we saw yesterday which is something everybody knows within drug distribution, pharmaceuticals have struggled with we have this stuff in-house and we have to take the inventory off the balance sheet into sub companies or other companies and it is a big accounting battle. david: that is the allegation out of citron which shorted the stock. the real issue is were they related to the special pharmaceutical the streeters -- distributors? stephanie: the distributors are the issue. for all of us who have been

sitting on the sidelines watching this herbal life battle, it is breaking down what defines a distributor, what bill has described what is the problem. -- he calls ause smaller berkshire hathaway. -- and the long but what i will say is that decades-old debate. the major message is this is not new to valeant. david: the real question is did you really sell the stuff? is there somebody out there with cash buying it? tom: they would teach you about revenue recognition. one los angeles company, i will not name it, there were criminal convictions used to load bricks onto trucks and drive trucks around los angeles.

no one is saying that is going on here but it is an interesting accounting debate. another message is there is no real answer. stephanie: bill ackman bought another $2 million in shares. this could be a case of hate the game and not the player, they are living within what they are allowed to do. has changed to neutral on the stock, not because they have fundamental changes in the company that in the short-term term they are saying the risk of , youises of headline risk do not want to be the owner or a buyer. tom: this banner is where we are headed, a great company cutting jobs. i am suggesting going into autumn next year. david: this goes back to the earnings-per-share versus the revenue. the way they are doing better on earnings-per-share is by stock

buybacks and by cutting costs and people typically that means. tom: that is amazing, he could not do that months ago. matt: they beat earnings-per-share. they beat them by a nickel and missed on revenue, sales 7.7 billion dollars, looking for $7.8 billion. there is a cool function, on any equity you can type in loss and it will show you the stock price where the company has cut jobs before. 2009 and july in 2009 it shows you where the job cut announcements were and we will see big circle here, 1500 jobs getting cut at 3m. tom: the most important article of the day -- stephanie: if you minimize on earnings day -- david: on that note we will have

to say goodbye to tom keene. next we will go to eli lilly's ceo. he will talk about have a beatty street. -- bb street ♪

♪ stephanie: you are watching bloomberg go. we are talking eli lilly who beat earnings expectations in the third quarter despite a revenue miss. $.13 better than estimates. comes on thes heels of a setback last week when they halted development of its once promising cholesterol drug. chairman and ceo john c. lechleiter joins us now from their headquarters in indianapolis. one of your largest shareholders

is cheering. tell us a bit about this number, in the last month you have gotten concerned that drug companies will be hampered by the ability to raise drug prices. we think about between hillary clinton -- the tweet hillary clinton put out. the key is innovation, we had to have new and better projects that bring value. after a long time of patent expirations we are launching new , includingnd they one for diabetes and one for cancer, are driving us back to growth. we saw 2% reported growth this quarter on a non-gap basis. revenue declined 4% but that was almost all due to rate.

we are back on track. back, i was going to ask you how you did so much better on earnings-per-share and and missed it by a little bit on revenue? john: we were close to the estimates on revenue. on eps we got a one-time gain from a security sale. the main part was controlling operating expenses so that 2% revenue growth was levered up by a 7% decrease in operating expenses which davis on a non-gap basis a 22% increase to 89% -- $.89. stephanie: do you believe biotech is still in a bubble? john: i do not know if events have proved me right but i said that in a context of a question saying what eli lilly do more and a to buya

biotech's. we will source innovation externally, good examples in our pipeline, rheumatoid arthritis drug is a result of a deal we made. we made -- we need to maintain is strong internal research program. futurelooking into the -- as i look at the stock price you have done nicely. you have had an upward trend. how do you grow? if not through acquisition, is a topline or further cost cuts? john: both for us. on topline, we have an opportunity to launch multiple products on the next two or three years and have two more drugs under fda review. other filings and submissions plan for the next 18 months. we are looking to revenue growth, on the other hand, we

promised our investors we would get back to something closer to historical margins in 2018. we will be focused on productivity and operating expenses and control. this quarter we have made good progress toward the goal. stephanie: you have a lot to celebrate. can you make heads or tails of news and the way this company operates in comparison to the way you do? john: they have a different model than eli lilly. events ofut the recent days as much as you note but based on what his being reported. david: is revenue recognition and issue in your industry? in our industry, most of us sell our products through the traditional wholesaler channel, specialty pharma is nothing new is there

-- and there are some cases where cancer products or medicines are sold through specialty pharmacies but this has not made any problem for us i am aware of. stephanie: good morning to you. thank you. chairman and ceo of eli lilly. david: breaking news on the ecb. matt: looking for the ecb release. i do not have it yet. waiting to see if mario draghi gives us any indication -- here it is. leaving its benchmark interest rate unchanged at zero point 05% but the positive facility rate unchanged at -0.2%, a negative rate. they are leaving the rate unchanged which was not unexpected. looking for more information about when -- you would say if but jon ferro was telling me is a question of when more qe will be put into action.

now or in december? jon is the expert on this. david: you have taken the right direction. joined by brendan greeley. n, i have been watching you for several hours and what i have learned from you, this is not a surprise. jon: completely expected. is the key part, had they run out of ammunition. there are three options that remain on the table, they can increase the size of the qe program, increase the monthly rate of purchases or leave it open-ended. the schedule for the end is september of .16 and they could get rid of that date signaling they could be ready to do more or cut the rate and cut it further into negative territory. on my a shameless plug

behalf, it is a matter of when and not if for a lot of people. stephanie: brendan, china and -- in.a in -- chime expected thedy race to change, we are waiting to hear from the talk in an hour and a half. within the talk there is more options we have. we could see some sign they will expand the types of assets being purchased. there is concern they are running out of high quality ecb assets to purchase. they may have to risk spanned the -- expand the set of what they have to buy. jon: i will make a technical. .2%, so is negative anything that yields below that they cannot touch it. they could drop the negative deposit rate more allowing them to buy more shirt -- short dated german debt. going forward, if they do run

out of assets they could buy things like corporate debt which could be politically a big fireball to deal with. at this point there options at the forefront off them all or to increase the current size of the purchases. matt: i have a great function that helps you visualize what he says, this is when but not if. fdrv and it shows you traders bets on currency. i do not know what it stands for. it shows you that the green balls are puts on the euro. big sizes, 600 million. bets that the euro will fall. these are the calls. i only have the ones bigger than 100 million euros far outweigh the calls, the market is betting

expands itshe ecb qe, driving down the euro. david: i have the most basic question, what does this mean? all we know is that it can drive down the euro. are they stimulating the economy? candan: monetary policy only do so much but it can pass through real credit growth in an actual place. that is happening. m2, the growth of credit in europe has grown. it has gone up since the beginning of qb. a central bank can only do that. it can only grow credit. household loans, consumer credit up 2.6%, that is happening. if we are not seeing inflation in europe, there's only so much the ecb can do, the mechanism it

can do is working. stephanie: can they stimulate the economy, they do not come they stimulate the market. brendan: they are stimulating credit growth. every banker was a you that these are the tools at our disposal you can also do infrastructure spending. stephanie: it seems like it is working for asset holders rather than people living in europe. thank you, brendan. hourll see you in the next when ecb president mario draghi holds the news conference at 8:30 a.m. eastern. we will take a quick break but next, carl icahn shift his focus from wall street to washington. we will have the details. ♪

a

david: ecb president mario draghi will be holding a news conference in 35 minutes. what they have to say about it is more important. isthe meantime, carl icahn taking his fight to washington. he is launching a super pac aimed at promoting legislation that will discourage corporate tax inversions. he is putting his money where his mouth is, in a statement to iis website he announced that " believe my own commitment of $150 million to the pack will be more than enough to make voters fully aware of the horrible consequences that will ensue if congress fails to cast legislation immediately to stop the inversions." of, i read this, i thought he is becoming an activist investor in the united states of america, he wants to change the position. stephanie: he is saying, you

d.c. arend washington, making decisions that will hurt the entire economy and no one is paying attention. we are not holding you accountable. he wants to hold them accountable but is this about is this his way of saying i will back donald trump in a bigger way? donald trump has said if he does not get the nomination he would not be running by the fact that carl icahn is putting this money out says something. donald trump's backing is pretty blue-collar. you are not seeing new york's power elite get behind him. changingump will be who is backers are if this passes. stephanie: -- brendan: i do not know carl icahn, but he will find out the rules are completely different. be versions -- there cannot

legislation on inversions unless we get tax reform. that is the dynamic in congress. profile twoopeful years ago of the head of appropriations, he did the lord's work coming up with a taxpaying that could pass the republican leadership and the white house dropped it like a hot rock. stephanie: you need to tell this to donald trump. he has same answers. i will get it done. he is ignoring the fact that there's infrastructure. 's position inahn apple is tied directly to this. stephanie: brendan greeley, thank you, more in a moment. talking mario draghi and ecb decision. ♪

>> minutes from now i'm a we will see what mario draghi says about trying to jumpstart the economy. valeant takes investors on it

while riding. bill ackman is doubling down. where u.s. stocks are headed next. we will check in with the roles largest money manager blackrock. ♪ -- we will check in with the world's largest money manager blackrock. ♪ david: welcome to the second hour of bloomberg go, i am david westin. stephanie: i am stephanie ruhle. we have covered a lot of earnings and in 30 minutes mario draghi will be back with a news conference. we will bring you that conference live and have full team coverage from new york to europe. nobody better to break it down than the house of bloomberg. we go to matt miller. matt: mcdonald's and it looks like a very good news.

a $.17 fx translation. sales will be hurt by the strong dollar. the estimate is $1.27. stephanie: let's help matt out. that is not mcdonald's. comingreeport mac moran up with a loss per share of $.15, we were looking for a loss of nine cents. freeport missing on eps. mcdonald's crushing it. mcdonald's beating on global cop was a up 4%, the estimate gain of 1.9%. in my cutting into julie hyman's territory. ? david: i think we need first word. , i have had my's eye on it. as matt wanted out,

earnings-per-share meeting the analyst estimate, $1.40 versus $1.27, and unexpected gains in earnings-per-share. unclear with the currency translation how that affects the comparables but if you look at p sales, it doubled what analysts estimated, four-person gains. in the united states -- four-person gains -- 4% gains. the u.s. is where the company has been focusing its turnaround efforts. expecting the new ceo would gain more traction as the year went on. all day breakfast a big initiative. something investors want to hear about on the conference call. the company is coming out with some forecast, forward-looking commentary saying that in the

fourth quarter it sees comparable sales positive in all of its segments. it is reorganized its business into four segments and saying all of them will be positive. the company is holding an investor meeting on november 10 and analysts were looking for more commentary on the forecast at that point. the stock is bouncing around a little bit. stephanie: people like egg mcmuffins all night and all day. union pacific shipping fewer egg mcmuffin's because revenue missing estimates. overlooking for operating revenue of $5.64 billion and we $5.5656 ilya dollars -- billion. companies are beating on eps, missing on revenue, you cannot mess with topline. you can adjust so you're eps number beats estimates.

43 what we were looking for, union pacific gaining and the same is true for freeport m cmoran. the eps was up. they both missed on revenue but shares gaining in the premarket. david: now we turn to dow chemical, up in premarket trading after reporting profit that topped estimates, their ceo and chairman joins us from my home state of michigan. welcome. tell us about the numbers. much but 12ry quarters in a row, this q3 performance defies all headwinds such as currency in oil price. we have delivered this year on earnings growth, margin growth, for 12 quarters in a row but underpinned by volume growth, eight straight consecutive quarters.

what we have built over the last many years is a portfolio that is structurally hedged to work in this world economy. our china numbers alone speak to that, the new china consumption which is consumer led, we are well-positioned, seeing 12% volume growth in china and we have been seeing that all year, defying everyone else and what they say about china. it is built for this economy, which is growing but growth is spotty and not consistent. as much as everyone is saying that the books are not strong, our book was strong. our outlook remains positive. stephanie: let's glow -- let's go brazil, 2 billion in sales there are things getting worse given the economy there? the one spot of the world economy that is new this year, not just the economy , we havet the real

an agricultural business that got hit hard. generalnegative spot in the emerging economies four months -- most of the 12 month have not been as positive. deposit repositioning of china, southeast asia, good, eastern europe, fine, africa growing but south america, brazil and argentina staying quite negative and it looks like for the next 12 to 18 months that will be what we have done it but good growth in europe and china and the u.s.. you get those three economy working, we can grow our bottom line. the topline effect is all currency and a little bit of oil price. david: during your tenure you have changed dow. , you havea chemist moved away from the more commodity oriented chemicals and toward specialty chemicals. where are you in the process, is a completed?

are you looking for acquisition or sales? where are you headed? the company of 10 years ago, if we had the company today, we would be at half or less of profits because of the explosion of the commodity world that is cyclical and unpredictable and inputs are going all over the place. we have built over 10 years a portfolio that has still low-cost imports but we added value to them based on market needs and technology differentiation. we are using a baseball metaphor, in a world series situation, in the seventh or eighth inning of a nine inning match. we announced three-year goals in 2013 and we are closing them out. today we are closing those out with the development of our chlorine business. the business we started with an which we merged with oil and finish three weeks ago.

we are one year early and have annexed the next three-year goals and centering our moves on continuing work on joint ventures. we are talking to corning about dow corning. there's avalue when mismatch between what the market sees and what we have in our portfolio and that is centered on agro sciences business. there is work to do but in the seventh or eighth inning and this company delivering consistent earnings growth and strong cash were a cash flow machine, big startups in saudi arabia and the u.s. gulf coast, coming online as we speak will enable more cash. our focus is returning the cash to our shareholders. being consistent and share buyback. stephanie: a cash flow machine is a bold up term, does that mean that shareholder concerns that we covered over the last few years have been negated, in the fourth quarter, the agreement you had with dan loeb is set to expire.

andrew: yes, we have shareholders from across the board from index funds too long only's to value shareholders, to hedge funds, to activist funds, they have to be listened to. the last three years of the company, i would say they had been a shareholder friendly. we have invested heavily in building the portfolio i just spoke about with david. that investment needs to materialize value and it is, three years in a row. more to come. looking at the value of our company and raising the value 40 -- all owners which i am a substantial individual owner. we are committed to returning cash to our shareholders no matter who they are and welcome our owners to talk to us about better ideas. stephanie: thank you for joining us. now chemical chairman -- dow chemical chairman.

we turn back to mcdonald's. it looks like they had a good morning, from a global perspective, not just from the all-day breakfast. the ceo has had a good start. >> a good beginning. straighten five quarters declining globally, seven straight in the u.s., people not expecting the u.s. to turn positive this soon and the global positives are a good sign that the new ceo's turnaround plan is on track. david: what is driving the improvement? >> they say they are selling more breakfast items, not part of this quarter but getting operations back on track and cutting some menu items. stephanie: what do they take off? wraps, things that were not for items, they sell burgers, fries, nuggets.

so far, so good. david: where are they taking it from? people like the upscale people have been hurting mcdonald's, are they taking it from other comparable, the low end of the spectrum or impeding with the upper echelon? >> there is more copper -- competition then ever,. , shake shack, when he's in burger king have done better with the value proposition. they are expected to make an announcement. hitting customers looking for deals back in their doors. yumhanie: the problem that brand is facing, they are not worried about that? china, are back in mcdonald's seems to have a bounce back in china more faster than yum. david: welcome to bloomberg go. thank you for being here.

here is a shot from singapore earlier today, a city state, one of very few. hazy city state. david: very new and very successful. down onman is doubling valeant. the stock got cried yesterday. the ecb, they have left rates unchanged but we will hear from president mario draghi about his future plans. on bloomberg go. ♪

♪ vonnie: i have your business plans, caterpillar's feeling the pain of a commodities slumped, the world's largest maker of construction reported quarterly earnings that missed estimates, plunging commodity prices had

led metals and energy prices to cut back on spending. crowded planes and lower fuel costs added up to a good quarter for southwest airlines. earnings beat estimates and southwest set a quarterly record . the airline estimates it will save $1.3 billion on fuel this year. apple plans to raise its investment in chinese solar power fivefold, the company has built solar and china debt produce 40 megawatts of power, part of their plan to upset global warming emissions in the world's most polluting countries. stephanie: a report from smalltime, short seller, valeant plunged nearly 40% yesterday. bill ackman purchase reportedly lost nearly $3 billion given bill's largests holding, but he is doubling down on the stock, picking up 2 million shares after yesterday's

selloff. there is true armstrong who covers pharma and health cars -- true -- true armstrong who covers pharma and health care. i sat down with him and asking -- asked him his position. making ispoint i was that it is a platform company. different than berkshire hathaway but a business where valeant has a competitive advantage in running one of the most effective pharma companies in the sector. mike is shareholder friendly. very focused on cost control and very disciplined about investment capital. that gives him a competitive advantage, he is the high bidder for many companies and products because when he layers the product onto his business, his operating model, he can more efficiently extract profit from that product. that leads to more profits for

entrepreneurs and more returns for investors. that leads to more innovation. for me to far be it disagree with bill ackman but when i look at jpmorgan's report, they say that mike does not communicate well with shareholders and they do not have enough transparency, is it only bill ackman biggest to see inside? >> we had a short sale report yesterday, stocked up 40% of the stock had been going down substantially before that. there is a couple of dynamics. had at , we have conversation about drug prices that have intensified over the last month, hillary clinton and bernie sanders and margaret -- marco rubio weighing in and they have been a big poster child from pharma for big price increases and they recently said they will stop doing that. they will change a part of their business model not to be about finding underpriced drugs and jacking up the prices but invest

in research and development. wasteful, inefficient, a terrible idea from big pharma but he says they will start doing it and shares already under pressure. questions about the fundamental's of what they do and how they do it, short seller comes out with this report perfectly timed. whether or not you disagree or agree with the conclusions in the report, and the shares fall off a cliff. david: what you describe is contrary to what bill ackman told you. he likes the company because they do not do that investment in research and development. is that changing the whole company? >> there is a shift going on at valeant. the reason bill ackman likes these guys is because they were taking advantage of a few -- a, and found out where drugs were priced low and you could sell them for more and there were regulatory

inefficiency from keeping the market from correcting. that is the perfect model. stephanie: bill ackman loves them for the same reason he loves 3g, they know how to cut. if you have ever sat down with my peers in it does not sound anything -- mike pearson, it does not sound like him. matt: i have one of the coolest functions on the bloomberg terminal, worried about your port, youortfolio, can input the holdings and we 13s,through bill ackman's he is down 70% of this year. -- 17% this year. you can see the breakdown, consumer discretionary, 12% of the shares. health care, 36% of his holdings

are in health care. you can see if you could again that valeant is the biggest loser. a drop of 20% yesterday, 33% month to date, 40% year to date. this is an incredible function on bloomberg and you can do amazing things, like at an oil shock or an ecb increase in rates. it shows you how bill ackman is losing out. stephanie: one of the drivers before the shortselling yesterday that has been pushing hedget down, this is a fund hotel investment, many hedge funds have followed bill ackman and say it he is doing it i will do it. he is one of the top five performing hedge funds in 2014. , i am in if bill is in and it has changed and those people cannot justify the investment to their westerners. -- their customers. david: i want to come back to

citroen report. i read it. i am just an old lawyer. it is replete with typos. in fairness, there is a lot of question about the accuracy of what was being accused of them. valeant came out with a statement and they said that any inentory are included valeant's consolidated inventory balances, no sales benefit from any inventory held at these specialty pharmacies and --entory is what i understood you to be suggesting is this may have triggered something but there is a bigger issue. some investors have with valeant . >> we have ready citroen report comment you say he does not nail this down, he raise questions that does not seem -- if this

was a lawsuit and we were in discovery we would find out a lot more and he does not have that type of information nor did he presented nor was he convincing on a lot of his points. stephanie: he convinced the market. seriousse he raised concerns about the special form of business models. an analyst came out with a note that said we can no longer defend the specialty pharma business structure. this is the sell side which is universally buys on the stock. buy onotes that say weakness when the stock is about to plunge 40%, these people have been boosters and now they are turning. not addressing the fundamentals. in hisie: uncertainty company is why we are going from overweight to neutral. that is why you work at bloomberg. be sure to catch citroen research executive editor later

on on bloomberg market day. that is going to be big. david: let's get to the morning meeting where we hear from what key financial institutes are looking at. the blackrock chief investment strategist joins us. we have seen u.s. stocks rebound since the end of september. they have struggled this week, what is behind investor anxiety? >> it comes down to earnings, u.s. stocks have rebounded that they have rebounded despite weak .ata and lackluster earnings given the fact that investors have gone back to an old theme which is that they treated economic weakness as an excuse to rally on the logic, whether the fed delaying the fed hike or the ecb adding more qb, weakness will lead to more monetary stimulus and that will inflate multiples and that has taken the market higher. david: earnings are down. generally.

rations out of whack? >> they have gone back to the previous spring, the last 25 years it is true that multiples expanded over the last two or three decades, the s&p 500 has not peaked until the trailing multiples. in the low 20's. i am not seeing violations are signaling a bear market but it is harder to put on gains when you are trading at these levels and the more positive development would be earnings growth which we are not seeing. david: you recommend people hedge with a long treasury bill? almost like cash. >> with treasury bonds. that is an important decision because if you think about what has happened over the last few months, we have gone back from an environment where people were

worried about the fed and growth. similar to what we saw in 2011 and 2012. treasuries do not offer much yield, offer diversification and are an effective hedge against equity risk in a portfolio. david: in the market itself, do you see exceptions that are more justified by the prices that are being sustained? >> yes, and i think there are parts of the markets inside and outside of the u.s. and offer relative values. speaking about internationally developed markets, not a brilliant year from europe or japan but the markets are up. david: thank you. more of bloomberg go next. ♪

>> the president of the ecb press conference early. mario draghi: demand remains , concerns over growth prospects in emerging markets

and repercussions for the economy and developments in the commodity markets continued to signal downside risk for growth inflation. most notably, the strength and close to 2% in the medium-term require analysis. contents -- context, accommodation will need to be re-examined at our december monetary policy meeting. projections will be available.

willing to act by using all the instruments available within its power to maintain an appropriate degree of monetary accommodation. in particular, the council purchasehat the asset problem provides efficient flexibility in terms of adjusting its size and duration. in the meantime, we will continue to fully implement the monthly asset purchase of 60 billion euros. these purchases are intended to run until the end of september 2016 or beyond if necessary until we see a sustained adjustment on the part of deflation that is consistent with our aim of achieving deflation rates low but close to

2% of the medium-term. let me explain the assessment of greater detail. quarter to quarter. in the second quarter 2015. 0.5% in the previous quarter. the second quarter reflected positive contributions from both the mastic demand and experts. the most recent survey similarrs fall into a pace of real gdp growth in the third quarter of the year. overall, we expect the economic recovery to continue, albeit

dampened, in particular by weaker than expected foreign demand. domestic demand should be further supported by monetary their measures and favorable impact on financial conditions, as well as by the project -- progress made by structural reforms. moreover, the decline of the crisis should provide support for households real disposable income and corporate profitability and therefore private consumption and investments. however, the recovery to message demand in your area continues to be hampered by the necessary balance sheet adjustments and the sluggish pace of implementation of structural reforms. risk remains on the

downside, reflecting the heightened uncertainties regarding developments in emerging market economies, which had the potential to further global growth and demand for euro area exports. on certainty has manifested itself in financial which mayestments, have repercussions for euro area domestic demand. ifo area inflation was -0.1 september 2013, down from 0.1% in august. compared with the previous month, this reflects the further decline in energy price deflation. on the basis of the information available in the current oil teachers prices, annual hr icp

inflation rates will remain very low in the near term. annual inflation is expected to rise at the turn of the year also on account of race effects the falling oil prices in late 2015. inflation rates are foreseen to during 2016 and 17, supported by the expected in past recovery declines in the euro exchange rate, and somewhat higher oil prices in the years ahead as currently reflected in the oils futures markets. the risks stemming from the economic outlook and from financial commodity market developments, which could

further slow down the gradual increase of deflation rate toward levels closer to 2%, these are being closely monitored by the council. turning to monetary analysis, recent data confirms solid notwithstanding a decline in the annual growth rate of three or 4.8 percent in august of 2015 from 5.3% in july. annual growth continues to be with the narrow monetary aggregate growing at an inual rate of 11.4 percent august after 12.2% in july. dynamics continue to improve the annual rate of change to loans for natural -- corporations , up from in august

0.3% in july, pursuing its gradual recovery since the beginning of 2000 or team. improvements, developments in loans to enter -- to enterprises continues to reflect the relationship with the business cycle, credit risk, credit supply factors, and the ongoing adjustment of nonfinancial sector balance sheet spirit the annual growth rate of loans to households increased to 1% august of 2015 compared with 0.9% in july. the euro area bank lending service for the third quarter of 2015 confirms the increase in demand for bank loans supported by the general level of interest rate, financing needs for investment purposes, and housing market prospects. in addition, credit standards is

enterprisesoans to notably due to increasing competitive pressures in banking , loans to households and house purchases. the monitor policy measures overall that we have put in place in june of 2014 provide clear support for improvement both in boring conditions and in credit flows across the euro area. to sum up, a crosschecked of the outcome of the economic analysis with signals coming from the monetary analysis, in the case -- indicate the need to firmly implement the monetary policy closelys and to monitor relevant income information as concerns their impact on the

medium-term outlook for price stability. monetary policy is focused on maintaining stability on the medium-term. it supports economic activity. however, in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively. given continual high unemployment and low potential output growth in the euro area, the ongoing recovery should be supported by effective structural policies. in particular, actions to improve the business environment include the provision of adequate infrastructure, to increase investment, boost job creation, and raise productivity. the swift and effective implementation of structural

will not only lead to high unsustainable economic growth in the euro area, but will also raise expectations of permanently higher incomes and accelerate the benefits and reforms, thereby making the area more resilient to global shocks. fiscal policies should support the economic recovery while with the eumpliant fiscal rules. full and consistent is crucial for confidence in our fiscal flame -- framework. both countries should strive for a growth friendly fiscal policy. we are now as -- at the disposal for questions. >> microphones are coming.

one second. >> last week said monetary us -- uperhaps it was to fiscal policy to loosen a little bit to provide accommodation. could you share your thoughts on this and perhaps touch on the tying budget and if i could ask curiousnd question, i'm what specific measures you will be looking at to make a decision of whether to adjust the program? >> on the first issue, really counting only monetary policy, as we said last part of the introductory statement, my trip

should not be the only game in town. this can be viewed in a variety of ways. exploredue actually examining the situation, but there are other ways, like as we times, we know to reap the monitor policy focused on maintaining stability over the medium-term, in order to reap the full benefits of our monetary policy measures, we must continue decisively. we stress the high structural unemployment and the low potential output growth in the euro area as -- as the situations we have to address. but there may be other points of view on this. policy isis monetary actually supporting a cyclical

economic recovery. we have to address the so we can components actually move from a cyclical recovery to a structural recovery. thes not forget even before financial crisis, unemployment was traditionally very high in the euro area. in many of the structural weaknesses that had been there before. question, as you might have seen in the thereuctory statement, was a very rich discussion about monetary policies that might be used if warranted, no specific choice. an assessment of the situation which i will elaborate further following your questions. the conclusion was we are ready to act, if needed, and we'll

examine all incoming information . we are open to a whole menu of monetary policies. to this extent, the governing council has passed the relevant committees to work on different monetary policies that could potentially be used to examine the pros and cons of different instruments. in other words, if one has to one would say it was not a wait and see, but it was a work and assess. thank you. >> following from your previous answer, would it be possible for you to elaborate today about the

options you still think are available to the monetary policy response? he said in the past, particularly the deposit rate, statement you still stand by or are the rates another potential option available? mario draghi: let me just report you on the general lines of our discussion today. we examined the prospects for , and weg our recovery concluded the recovery is continuing and it is projected to continue at the same pace it had in the second quarter of this year. we have to distinguish two components, the domestic part of the recovery and the external part. the domestic part has shown resilience, mostly driven by

consumption, and the drivers of this recovery are the lower oil prices, and also our own monetary policy, and, to some extent, the fact that many countries have received progress in fiscal consolidation so the headwinds coming would be lower than in the past. to see how important our monetary policy is, consider the real disposable income and consumption have grown at the same pace. it implies the growth savings has been flat. it has been flat. this is so because interest rates are so low. you office complaint -- often complain about savings but there is a positive side to that. hand, we have an external demand which has shown weakness, mainly for the challenges the emerging market

economies are now experiencing and, more particularly, china. on the inflation rate side, the picture is -- we see that in headline inflation will stay low , although ited time just said that we expect to pick up due mostly to these effects and possibly projections of higher oil prices. having said that, the core inflation is basically stable at 0.9%. when we look at the expectations of inflation, which is a very very -- relevant value, we see that since our last meeting, short-term inflation has inclined -- declined but medium to long-term inflation expectations after some decline

have fallen and are basically unchanged since then. development is both for market-based inflation and survey-based inflation expectations. however, we see some downside risk as far as this picture is concerned. risks come from the possible further fall in oil prices, from the fact that the nominal effective exchange rate has depreciated in the last three or four months, if i'm not .istaken and finally from the fact that a highinue to observe degree of correlation between headline inflation and

medium-term inflation expectations. that means a high degree of correlation between oil prices and inflation expectations. this is a race because it could lead to a d anchoring of inflation expectations. and asre present observed, these have gone up and we want to be vigilant, as people used to say. on the other hand, we see credit markets are moving. so the overall assessment, as i said, is not wait and see. it is work and assess. the council is there ready to if the conversion of our

inflation passes to 2% in the medium-term is pushed back. i think i can stop here. i said before i do not know if it was the last meeting or before that, they said it was not discussed. discussed.t was the further lowering of the rate was indeed discussed. ofis one of the instruments monitor policy i referred to when i said all of the instruments had been discussed. >> brian blackstone with the wall street journal. about the inflation picture being less sanguine.

can you just explain a little bit more to the public why you think you have to fight so hard against low inflation? especially for lower middle income people spending month -- spending less of the gas station ,nd grocery store, hoping people buy more stuff when inflation is low. why spend all the money on government bonds to fight something a lot of people would their good for them in budget? my second question is, is there a risk that the ecb will kind of fall into a trap without end, that you keep buying up the bonds? the federalom reserve experience, whether or not we raised interest rate, is there a danger the stimulus keeps going on and on the bekets and that you will not able to get out? thank you. draghi: let me respond first to your second question.

the projections of recovery in are conditional on the full implementation of the qe program as announced in january and the full implementation of all the credit easing measures in 2015. so we would have to continue that. on the other hand, there are also based on a set of technical assumptions concerning exchange rates, although prices, external demand, growth and output, and so on. to the extent these conditions worsen, wepossibly will have to adjust our qe program or in general our monetary policy stance. sense of our discussion about downside risks.

on the low inflation, i have discussed this many times. low inflation on the one hand has a supporting power for real disposable income. increaseser hand, it the real value of debt. as we have seen, low interest and itromote consumption is essential for the recovery of growth and economic activity. but to fight low inflation it does not mean that we want high inflation. we just won't be complying with our mandate. which is, drive inflation back close but below in the medium-term.

i understand the vice president might want to add something in the first question? >> thank you. yes. i would like to add something. it is the second or third time you asked a question so let me add something. first let me remind you that you some years ago in the u.s., there was there was a commission to examine economist the measurement of inflation. the conclusion of the boston commission was that the way the inflation was measured, particularly the kind of indexes used, tense to exaggerate the measure of inflation by 1.5 percentage points. the target would be zero, we would be targeting a negative inflation rate.

measuring problem which justifies the target for inflation should be above zero. the second point is the point the president just reminds you about dead inflation. when there is a situation, when inflation is very low, that is very instrumental to the economy. the first point is we have very low or negative inflation. the real and, when the nominal rate cannot go below zero, it means the interest rate in real above equilibrium real interest rates. that is another reason why -- that inflation rates

is -- then there are deflation rates. inflation isive not a deflation situation. that is a situation of prolonged, more than one year, negative inflation. in that case, you have two phenomenon. , soncrease in real wages , andill constrain supply second, there is also in such a situation a problem of consumers expenditure,eir it's inflation lasts long enough. when we're talking about real inflation.

there is a host of reasons .entral banks fight inflation just remind you, there is not just one way of central banks spending money to fight inflation. we and other central banks chase securities. changeds central bank in order to defend the level of the exchange rate that they want, and it is higher than ours in relation to the gdp. >> thank you. of all, you would like to ask a question on what you said on the deposit rate. would you explain a bit more the reasoning behind the discussion? rates --had said the

how will this measure up? how would you explain the move to the market? if he were to extend qe, the -- that yought the might have to extend? thank you. >>. my answerst question, is linked to the previous question. are at practically a zero nominal rate, the real rates are being driven by xp -- expectation all deflation. --er expectations decline negative expectation of inflation. whenever they become more negative, we have higher and higher real rates.

that is one of the reasons why we can see there are no standard monetary policy measures, one of which is the negative rate of the facility. we decided we have seen that and we decided a year ago lower bound, then we see the experience of other countries and now we are thinking about that. we have not made any decision on that. it was an open discussion on all the monetary policies. we discussed monetary policies besides this one. on scarcity, i have been asked this question many times. we have not seen it yet. let me say also the fact that the ecb now is a constant source of demand on the markets, this is helping market makers and this by itself increases

liquidity. we're not chasing bonds that we .now are less available and let's not forget the ecb is also lending bonds to the market participants to increase liquidity. have said many times, we stand ready to adjust the design of our asset purchase program according to the needs and, if needed, thank you. >> the governing council met in a member state where gdp growth was 5.2% in the second quarter and inflation is 1.6% and unemployment is five .4%. the economic situation, that is very similar to the one we see in germany. you have got the biggest company in the country and one of the smallest countries performing similarly and in the middle,

ranging quite differently and despite the ecb. is this something to do with structural change and what insights will you be taking for your future policy deliberation? >> on this question, i would like to give the floor but let me say one thing, why we have observed this difference. you are right that one of the most important differences is the degree of implementation and structural reforms in the different parts of the euro area. there are other considerations. different cyclical positions. there is a different exposure to external shocks. if, for example, a large market were to experience a recession, they would reverberate in a different way. the sort of economic policies

you have undertaken to adjust to the macro economic imbalances crisis,ly, before the there is also one other consideration. also, what is the -- that is probably one of the most important differences, what is the degree of in debt? both in the public and private sector of different countries. it is quite clear a high stock of debt hamper growth. how to get rid of these different ways to decrease in debt also have different implications. i would like to give the floor to the governor as far as it is physically. of the economy is concerned. >> as the president has said, structural change has a lot to do with the performance of the economy. it has gone through quite a significant structure change over the years, which has

enabled the economy to be much more resilient and dynamic. sectors fall by the wayside. the impact ofhat the qe on the asset purchase country it has on a exchange of gdp, the rates, also very important for the small economy. from tourism to exports of goods. perhaps also, one needs to look at the fiscal space the government has. the deficit has been coming down, the public-sector debt is just above the eu out bridge. all of these factors give you more space for an economy to be able to expand. in some ways to germany, which has a similar scenario.

>> thank you. world business press. you stressed that the world market development is a warning for the governing council in terms of the growth outlook. how would you judge a china slowdown to 4.5%, and how big of is that for the inflation outlook and not just the growth outlook, and how big a threat for the inflation exchange rate of the euro? that is the first question. the second one, the last part of your introductory statement, you mentioned structural reforms.

this was a point you're making, structural reforms are very important for countries and just yesterday, it was pointed out the level of government debt in the euro area countries is growing and that only small countries, only three countries, actually fulfill the area. but would be your comment on that? thank you. >> thank you. question is quite important. there are two ways to respond. one is to look a different channels of what happens in china toward the euro area. and then, in a different way -- let me first explore this way. first of all, we look at all

these channels, mainly directed trade.hannel or indirect the direct trade channel, the conclusion is the exposure of the euro area to the chinese economy is not very significant. 6% of the total. some cut --re are some countries where the figure , inigher and it reaches 10% the tape -- in the case of germany. i would say it is not exceptional. ,he second is indirect channels where you have also to account for the changes in oil prices and commodity prices that are higher recession in china would imply. the third channel is the financial channel.

exposure.ferent we think so far, what happens in the growth in china has not in the restfident of the world and more specifically the euro area. the latest meetings in lima, the imf confirmed growth projections for this year as far as china is concerned, above 6%. so this is not, your perspective is not something that is on the screens now. surprise and a large economy might have the potential to affect confidence worldwide. then we would have to see which way and how to cope with that. question -- by the

way, the other thing is, the other dimension to this is when we say it concerns the effect of lower oil prices on our economies in general, we have mostsaying several times of the reasons why oil prices supply have to do with conditions and demand conditions only play a minor role. suggest that we should be more cautious about thatbecause to the extent the investment in oil production on been geared in the past the basis of projections of demand, which turned out later to be less than expected, this

oil pricereduced shock and has different consequences on inflation and inflation expectations than it if the shots were supply determined. i think i've answered your questions? thank you. >> i also tried to ask about the change rate for inflation projections. >> regardless what happens in china. risks toe downsides inflation projections comes from the exchange rate. phenomenal effect of the exchange rate has been

depreciating over the last four or five months to a somewhat significant level. but let me restate the exchange rate is not the policy target for the ecb and it has never been. however, it is significant, as i just said, for price stability and growth. thank you. >> mr. druggie, you told us today there is an open about the possible .ext step did you already see preference or maybe specific position regarding the options necessary

to border its policy from a theific position regarding options the ecb could use? the second question, could you a new rate was discussed today. i would be interested to know if you could elaborate a bit more on the argument for postponing an action to the next meeting. thank you. draghi: the answer to the first question was no air there was no explicit preference for one instrument or another. all of them were considered. as me add one thing as far the possible changes in the rate on the facility. how calmly announced a year ago

zero lower bound and now we're thinking of going into further negative territory? let me state quite clearly that the credibility of a central is measured by its ability to comply with a mandate. to this extent, any instrument could be potentially used. given the conditions prevailing was thego, that statement. today, things have changed. this does not imply that we will use this instrument. the discussion was wide open. with the credibility argument. i would say there are few members of the governing council which hinted at the possibility today. i would not say it was a

prevailing theme of our discussion today. >> allow me to touch again on the issue of structural reform. to act in this manner at any moment. would you go so far as to say that if structural reforms are not taken seriously and more strident i the relevant government, qe will not be able to fulfill and its total amount will not be added to so successful will as it would like to be? if this is so, my second session, does it make any sense to adjust or even expand qe? never saidi: no, i

it would if there are no structural forms. by our monetary policy into a structural policy later on. apparent among trade palsy measures we have been undertaking over the last year and a half or two years especially, they have significantly improved. the financial markets in the credit markets. now it is time with me cvs improvements being translated into a recovery which is resilient, especially in domestic component. no doubt the effectiveness of

monetary policy, regardless of whether structural reforms had been implemented or not. we should not add a negative picture of -- there has been about that.several it is not that the countries did not do anything. done.an be there is room for improvement. quite a few reforms have been undertaken in our countries. thank you. >> is there concern that the asset purchase spoken would be inconsistent to create conditions that would support growth? mr. draghi: our judgment today stance that has

with monetary policy measures announced in january, over the course of 2014, is essential for producing in output and the conversion of inflation towards or below 2% on the medium-term. these objectives are predicated on the full implementation of the monetary policy. current assessment. thater, if we were to see the technical assumptions underlying these projections has the downside risks are increasing and further on

materializing, we may well the size, composition, and design of all of our monetary policies as needed. >> could you comment on the possible political uncertainty in spain and portugal and if that could derail the forces of reform you have alluded to so many times today, and the worry for the ecb, the fact that some of the parties that may be called, especially in portugal, respect the euro? mr. draghi: the answer is no. . cannot comment a more gentle way of saying no

would be, uncertainty for economics is that. it is bad for consumption and bad for investment. political uncertainty as part of democracy. thank you. >> thank you, i have two questions. the chinese president is currently paying a visit. -- the chinese president is currently paying a state visit to the united kingdom. what are the positive effect this visit will bring between china and europe and what is your expectation on the development of economic relationships in the future? thank you. mr. draghi: i just cannot

comment on this. these are political statements. >> what are the positive effects that you think in the economic relationships, what further development to you expect? china is a i think very significant partner of the and will remain so and, if anything, will become stronger and stronger and economic partner in the euro area in the future. >> how do you assess the the euro zonet to economy? thank you very much. my answer will be short. it is very early to say.

time when we a have full visibility of the economic impact but it is very early to say it now. >> from abc australia. i wanted to see is a government counsel had any discussion or crisis ande migrant what potential impact that would have depending on the decisions made on a potential resettlement in europe. thank you. mr. draghi: it was a brief on the migrants. it was very brief because it is very early to say what the impact could be on the euro zone economy. are at a time when we can

only make inferences really, from a standard economic thinking. it is clearly a very significant increase in labor supply. there is also probably a need of significant labor supply, the the publicw investments, knowledge and education and so on, will be financed. that will also make a big difference. early,uld say it is very as i said before, it is very early to have full visibility. even more so, to know what impact this might have on monetary policy positions. the important thing is that we should be able to cope successfully with this

ofanitarian crisis unprecedented size. >> the final question to mr.'s death mr. pharrell. >> yes. earlier, we had a governor's take. i would like to ask for your opinion as president about financial and economically and the weight is implementing its policies and how it is following advice and guidelines rot forward by the ecb. i am sorry to say i will revert again to the governor for an answer to the question. i say this not because i want to avoid the answer but because he is the most delphi to answer the question.

click thank you. following the asset price purchase program, it is on target and basically also, when structural change and policy, iendly fiscal think it is on the right track. there is a type of fiscal policy and is reducing the debt focus next year to 1.1% gdp. theink that is good enough same time, the debt burden is going down and the expenditure is going into areas from thattion to other areas essentially improve the quality of labor supply. in general, i think it is performing reasonably well for its own future. it is a good performance. >> thank you. we will now close the press conference and take the most his spirit with us care for all of as ofaveling to frankfurt

november, we will take this with us. thank you very much. goodbye. david: we have been listening to -- ecbpre-president president mario draghi. he has been pretty explicit in their use of instruments available to them. they are concerned about inflation and structural deployment. our colleague in london as well as brendan greeley here on set. and erik schatzker. let's go first to john. how did you read that press conference? john: extremely dovish. the whole one-hour press conference condensed to three lines, downside risk to growth and inflation, they were re-examined the degree of stimulus needed and some wanted it now. -- it is nowarket just a matter of what they will do. brendan: he said twice, it is

.ot wait and see it is look, work, and ssp or he said they are actively working on figuring out how they would change qe. even farther below zero. denmark trying to figure out if that was an option. we did discuss it now. everything is on the table. that is a huge change. stephanie: only he's allowed to lean in, eric? >> he could not have hinted more strongly that the ecb is on the cusp of policy. some members of the government

counsel want to be right now. traveling to a record low yield. this is what you would expect to see happen. i want to point out a couple of other things. i was really surprised to see the migrant crisis become so late. the final point on that was probably the most important one. theelieves the eurozone other thing is the dissidents about china. mario draghi was talking about the resilience of the eurozone of the economy. it is working and helping to counteract the economic cycle and the euro zone economy on a domestic basis, actually performing quite well. he appointed the chinese before effectively creating the

problem. emerging markets are causing growth inflation too slow and that is very difficult to reconcile that china says it had in the third quarter. >> on to see whether you caught the same change in tone that i did. they are nott said just worried about negative inflation but long-term negative inflation. they used to have an automatic response worried about runaway inflation. they are actually worried about spiraling into deflation. i thought that was an extraordinary change of tone. john: what mario draghi discussed was headline inflation shapes expectation and he also said that oil shapes inflation expectation. the whole and that argument, that is a headline inflation rate and what shapes it. oil and exchange rate. the news conference reemphasize how important the channel was to

stimulate the economy and get inflation back to the economy. the moves in the bond market are quite remarkable. tight, tight, tight. germany versus italy. back along those basis points once again. markets have reacted accordingly, as eric said. >> he barely touched on the growth and credit and there was a long segment with answers to many questions about how they will -- struckother thing that me was the fair amount of talk about we structural form. the exchange for the germans, restructuring form.

>> you had a question for someone from china, is in china important, the trade relationship. i also think he said, meier druggie, before he said anything about restructuring reform, he pointed out infrastructure structural reform, but we need infrastructure spending. he couched it in, it will raise potential but also, it creates jobs. stephanie: in terms of instructor spending -- >> germany would do infrastructure spending, that would make it different. stephanie: matt miller. matt: he brings up credit. i put it together in the white line, the ecb balance sheet. the green line is german inflation. if you just look at those two lines, you can see when you get a significant amount of qe or bond buying.

they continued to increase the balance sheet but they're not getting any traction in terms of losing inflation. brendan's point is a good one. they are still getting in traction as far as credit. they are still able to boost credit but they cannot do crisis. about will that actually do anything to improve the green line in the chart? i think the concern is that it will not. su want to look at trends and not the recent numbers. is the growth continuing or should we just pay attention to long-term trends? is whatuestion for me is -- what are the using it for? plans, equipment? >> he are seeing huge growth in loans.

that says to me spending on , the other place you are seeing the grooviest consumer credit card we're not talking about a mortgage here. all about cars area lower level in car sales. thehanie: there we have opening bell. it is 9:30 a.m. here. eric,r in san francisco, send it back to you for additional thoughts? erik: we have heard the same thing out of the fed, finding space in the necessity of quantitative easing. assaid we have no choice long as there is inflation to speak of and as long as inflation expectations are as low as they are, the ecb is obligated to be more common native if they find a need for accommodation.

more quantitative easing will actually help. this is the debate on qe3. >> how's it looking to you in london these days? john: in terms of the economy, things look well. economy.domestic it is very different to the eurozone where the domestic economy is still so fragile. just to wrap this up if i can, going into this meeting, expectations are right up here. .ruggie hopped right over them going to the summer, they are even higher. i wonder if we get a cut of the deposit rate. and they increase the monthly purchase rate here that will be the debate for the next months. stephanie: something we're

getting from a viewer, he says the negative deposit rates are mostly optical, most deposits, retail especially are exempt. the world has not really .xperimented what you say? >> that is not choke it with the one bank offer deposits in switzerland but it is largely right. the question is how far down but can you get the negative deposit -- deposit rate one economist in getark says we think we can -- he is right in the sense it has not happened yet. the do not know how low deposit rate can go. i have a great function jon ferro spends most of his day looking at.

it shows you what the market wants or expects. the swaps pricing in. , current orine historical rate curve, the green line is what they are pricing in. it has gone significantly negative and even more seriously negative for the one year. this is the gap the market has between expectations and the current curve. we're looking at 10 basis points here. they really expect the ecb to go into qe to the extent that it would be negative if you grabbed it on a curve. if you click on world map, you can see, this is just a really cool function. is one yearthis

out. the decrease in rates or the increasing of qe. the same in canada. here, we expect the increasing of rates in the u.s.. you can push it out two years and in the market expects things to get a little the debtor -- better. finally you're starting to see the ability to increase rates in europe. not until then. i love the way the world map works out. >> weigh in here. at your question was about negative rates and the actual. in denmark and sweden. are we about to see them had up to stockholm and copenhagen to see what happened? is that what is implied? >> know, we are already experiencing it now. what you see straightaways what happens with the fx channel. buyingre people still german two-year the real thing is the money will not come into the eurozone to the extent it

did the year before the negative deposit rate. you ar about >> it is an important point he is making. the negative rates were onlicitly in denmark to hold . to manage his relationship with the euro. it is very much about exchange rates and not -- not as much about economic extent -- economic stimulus. >> thank you very much. next, we will talk about big cuts that may be coming to deutsche bank bonuses. details next. ♪

vonnie: welcome back. here is our latest. the debt ceiling deadline has prompted the department to postpone options of two-year notes. the department must raise within the next 12 days or the nation will risk defaulting on debt. of five and seven your notes will be held as planned. third-quarter earnings missed estimates. net income per share fell a year ago. demand is soft for mining equipment. shares fell 24% this year. another setback for stec -- fantasy sports. ban might not apply to college football, not run by the ncaa. stephanie: thanks. we have got to talk about deutsche bank. any excuse to talk about my all

my home a moderate. reportedly weighing a decision bonuses by one third, a whopping $566 million. no action has been taken yet. they will likely impact fixedees most in the income business. some managers may have entire bonuses scrapped entirely. bonuses may be cut as the company reports a third-quarter loss of 6.2 billion euros after writing down the value of assets. let's bring michael moore here to discuss this. we said this two days ago. with the management shakeup, it is like the legend and legacy completely vanished. fixed income, this is the business he built. he hired. he over hired. the bank be? classic german focused european bank.

they will still be decently sized fixed income. but you know, if they lose people from this, they might not be the top player they always were. stephanie: if you cannot pay, there is no way to remain in your position. i think john is taking a .age from james gorman when we were talking to james gorman about the complaints he was fielding from employees at bonusestanley, that the were being cut because it was in turnaround mode, he said if you do not like it, they could leave. they do not have very many places to go. over the past year, wall street has slashed $20,000 -- 20,000 jobs. stanley a little bit.

the hedge funds have hired the people they want. stephanie: we heard this out of morgan stanley. we said he -- he said he was leaning out. he did not retreat entirely. he kept a hand in credit and that got cut off earlier in the week. talentst a lot of their and pulled back some resources and they are kind of in that business. if you are kind of in that business, you could get your head cut off. completely going to pull out or pulley a morgan stanley, which has not seemed to work? erik: yes, they are retrieved from some businesses, but cutting bonuses is not necessarily a retreat. it is a challenge to employees. are you prepared to stick it out and wait and see if things improve as we retool the organization or are you going to off of the door and see if you

can find better prospects elsewhere? thehanie: they love getting benefits and waking up early? give me a break. bonus is a bonus and you get paid a bonus in good years. if you have bad years, you lose the bonus. >> you are not a traitor. not.am most of the world is not sympathetic to this. stephanie: that is the upside of working at a bank. as opposed to when you work at a hedge fund where if you do not make money or get over your high water, take a hike, good luck, you lose it off. that is the cushion. >> it is not capitalism. ik's point,o er there is one less place to bolt to. david: goldman sachs are hiring traders from glencore and hedge fund capital management in an

attempt to rebuild the bulk commodities team. earlier this year so explain this one to me. they had not very good results that came out. high risk is a trading park. they want to go into commodities , which seemed high risk to me. stephanie: this is their dna. >> and they pulled back on a lot of investments in the area. they had a great commodity investment business for a long time. a skilled that back and sold columbia minds, not a good investment. holding back up on the trading side because they lost some traders earlier this year. are nothas said they leaving commodities even as everyone else does. they will stick it out and they hope to be the one remaining player that captures a lot of markets. this is the place you could

go if you are a commodities trader. they do have a place to go, it looks like goldman. >> maybe. we are talking about tito's people here for the moment. it looks a little counterintuitive, but it makes me wonder whether this does not signal goldman's ambitions or intentions or expectation about the investment banking prospect in the energy and bulk commodities area because there is distress there and goldman has always seen an opportunity for synergy between trading and investment banking. you can structure deals if you have the expertise, the commodities expertise in-house. if they have these people, they might be able to do a better job than jpmorgan, which got rid of its commodities business. >> right. they have done a lot of reserve base lending. they have really stepped up the business. i thought it was interesting in the third quarter they said commodities revenue was actually up from the second quarter and they said they benefited from a

drop in prices. they may have been positioning themselves for the opportunity. >> yes. declining prices does not necessarily on its own mean it you cannot trade. there is a buyer and a seller and goldman is in the middle still making money. stephanie: think about the people they have been losing. there is a difference between proprietaryt investor and being a strong traitor. they have gotten out of the investment stage. many traders have learned in the last five years who simply thought they could get out of their seat at a bank and continue to make it happen, it is a completely different skill set. they go to the likes of glencore and they realize the grass is not necessarily greener on the other side, especially glencore, the fact that they had a style drift, you are a traitor there and you're a super strong and you go, wait a minute, i'm out and i'm going back to a bank.

>> esp or the banks are now a more pure trade play. in trading, you're not in investments anymore. it is all about positioning. david: thank you very much for joining us with the banks. now we will talk about a different story. let's get a check on the markets. matt miller, what are you looking at? franklin resources is the story we want to look at here. matt: getting out slowly crushed. stephanie: because of oil prices and commodities. energy prices.f i think 18%. you think only automotive companies have cool takers? franklin's ticker is ee and. -- ben. the net profit was down 44%. byy missed street estimates $.16. i think it was $.59 that they put out.

for $.76 in ag survey of 16 analysts. $30 billion in this quarter because of wrong way bets on commodities. templeton and a total re-for -- return fun had been problematic. if you look at my terminal, i will show you what will happen if you have been invested in franklin in the last five years. first off, the white line is ben. orange line is the s&p 500. i also added the a line, other asset managers and custody banks. there are 19 of those. they were so public and outspoken in the spring about doubling down on energy investments and buying these companies at a seven dollar price. they blinked and they were down to 20. they have nothing to do but sell in the world of dodd-frank, they cannot buy anything. this is a five-year chart.

total returns over five years started looking bad and just got works. -- worse. stephanie: -- david: not good for ben franklin. ♪

david: we are told that hillary clinton is just arriving at capitol hill. she is therefore gresham hearings. this was moments ago. congressional hearings on the benghazi situation. this hearing was supposed to be a big battle for her. it turns out republicans have telegraphed as political. prepared forhe has this for quite some time to make sure she has gotten it right. if she gets this wrong and it goes sideways, especially after joe biden said he is not running, it is becoming the bernie sanders

show? ., our partner in san francisco, what do you say? the: these are some of stories beyond the ones we have been talking about that have the stock market buzzing. i suggest we begin with mcdonald's. the signs are clear that the mcdonald's turnaround strategy under the new ceo is beginning to work. mcdonald's reported its first quarterly increase in u.s. same-store sales in two years. new deluxe cited its crispy chicken sandwich and all-day breakfast, a new innovation at mcdonald's as key drivers of growth. look at the stock price. mcdonald's has been taken such a beating. any good deuce from shareholders is something to be celebrated at least by them. 7% is remarkable. >> the shareholders have been waiting for some time. they were hungry for

it. get it? is dowumber two chemical. you talked earlier in the show. the companies unveiled a number of moves to reshape the doubt business. and leadership team. he named a new chief of operations and two new vice-chairman. there were wider profit margins in the plastics is this. exciting stuff. plastics made up for some weakness in agriculture markets. numbers, a profit of $1.3 billion, up from 50% from a year ago, and 11 months after the company avoided that proxy fight , but there is that standstill agreement you guys were discussing that is due to expire , a truce, wouldn't you say? stephanie: listen, when we asked, he did not say dan's name.

he said we have asset managers, we have a range of investors. in the fourth quarter, that agreement they have comes off so we will see if mr. loeb puts the gloves back on january 1. number 3, 1 of your favorites given you know the ceo of under armour so well, his company posted a revenue increase of 28%. it is remarkable how fast under armour is growing. footwear sales may have gone big in footwear. that line is growing massively. they raised the full-year revenue guide and says revenue can climb by 27% in 2015 if operating earnings can rise by 15%. here is the thing. if this were any other company, there would be growing concern about the lack of operating leverage. operating earnings should be increasing at least as fast as revenue. so long as revenue is going up by 30% added to -- i do not think anyone cares. this was their first

billion-dollar quarter. in 2010, just five years ago, $1 billion was the total revenue for the year. it is the category on fire. overnsecutive quarters of 20% growth is a big number. >> and kevin is not dialing it back. he is playing to take the company to $7.5 billion by 2018. it is impressive. stephanie: there you go. that does it for "bloomberg ." tomorrow, we will talk with steve ballmer. ♪

to the "market makers

-- welcome to "the bloomberg market day." ♪ betty: from bloomberg world headquarters, good morning. i'm betty liu. hillary clinton defends what you did on benghazi. she testifies before a house committee. we are going to go live for full billoverage of the hearing ackman lost a fortune on valiant yesterday and now he is doubling down. news on thenomic housing front. i want to get to julie hyman. julie: the numbers coming in better than estimated by economists. 5.5 5